COVID-19 'Slight Impact' Still Halts Economic Recovery... Consumption Drops at Largest Rate in 8 Years and 11 Months (Comprehensive)

Statistics Korea Announces January 2020 Industrial Activity Trends
Despite COVID-19 Being 'Slightly Reflected' in Consumption, Triple Rebound Halted
Total Industrial Production Up 0.1%·Facility Investment Down 6.6%

[Sejong=Asia Economy Reporters Kim Hyunjung and Joo Sangdon] The economic recovery lost momentum starting from January this year, a period when the impact of the novel coronavirus infection (COVID-19) had not yet been fully reflected. The retail sales index fell by the largest margin in 8 years and 11 months, and investment also showed a sluggish trend. Statistics Korea forecasted that indicators would worsen from February as the impact of COVID-19 would be fully reflected.

According to the 'January 2020 Industrial Activity Trends' released by Statistics Korea on the 28th, retail sales in January decreased by 3.1% compared to the previous month due to reduced sales of passenger cars, shoes, bags, and cosmetics. This was the largest decline in 8 years and 11 months since February 2011, which recorded -7.0%.

An Hyeongjun, Director of Economic Trend Statistics at Statistics Korea, said, "Since December last year, travel consumption decreased as Chinese tourists declined, and duty-free sales dropped due to fewer Chinese tourists at duty-free shops. However, since the first domestic COVID-19 case was confirmed on January 20, the impact of COVID-19 was limited."

Facility investment decreased by 6.6% compared to the previous month as investments in machinery such as special industrial machinery (-6.0%) and transportation equipment such as automobiles (-8.0%) both declined. Domestic machinery orders increased by 24.0% year-on-year as orders rose in private sectors including electronic components, computers, audiovisual communication, and public sectors including others. Construction performance also increased by 3.3% compared to the previous month as both building (3.0%) and civil engineering (4.0%) construction results rose. Total industrial production increased by 0.1% compared to the previous month, with production rising in service and construction sectors despite a decrease in manufacturing.

The coincident index cyclical component rose by 0.3 points month-on-month as construction performance and service production indices increased despite a decrease in the retail sales index. The leading index cyclical component increased by 0.1 points month-on-month as the KOSPI and economic sentiment index rose, although export-import price ratio and construction orders decreased.

Regarding this, Director An said, "With the indices rising together for two consecutive months, the indicators suggest that the economic recovery continued last month. However, the limited reflection of COVID-19 and the difficulty in judging future economic conditions based solely on the indices remain challenges." He added, "The impact of COVID-19 on overall retail sales and investment was not yet fixed in January but will be reflected in February. February is expected to be a difficult period for economic recovery and will likely constrain the recovery trend."

However, looking at the statistical trends during the Middle East Respiratory Syndrome (MERS) outbreak in Korea in 2015, it was explained that when a disease-related adverse event occurs, indicators worsen in the short term but recovery does not take long once the outbreak ends. Comparing three months before the first confirmed MERS case to three months after, accommodation and food services fell by 3.6 percentage points, sports and leisure by 2.5 percentage points, and wholesale and retail by 1.3 percentage points. Regarding this, Director An explained, "The impact appeared immediately after the outbreak and rebounded quickly once resolved. The economic impact continued for about one and a half months after the last patient was confirmed (July 5, 2015)."

This content was produced with the assistance of AI translation services.