Due to the Impact of COVID-19... February's 'Production and Consumption' Decrease Largest in 9 Years (Comprehensive)

Statistics Korea, February Industrial Activity Trends

Production, Consumption, and Investment All Show 'Triple Decline'

'Coincident Index Cyclical Component' Down 0.7 Points from Previous Month

Ahn Hyeong-jun, Director of Economic Trend Statistics at Statistics Korea. (Photo by 자료)

[Sejong=Asia Economy Reporter Joo Sang-don] The impact of the novel coronavirus disease (COVID-19) sharply contracted domestic industrial activity in February. Retail sales and total industrial production each fell by 3.5% and 6.0%, marking the largest decline in nine years since February 2011, when the foot-and-mouth disease caused a sharp drop. The coincident index cyclical component also decreased to levels comparable to the global financial crisis.

According to the 'February Industrial Activity Trends' released by Statistics Korea on the 31st, production, consumption, and investment all declined, recording a triple decrease.

First, total industrial production decreased by 3.5% compared to the previous month due to reduced output in manufacturing, services, and construction industries. This is the largest decline in nine years since February 2011, when total industrial production fell by 3.7% due to foot-and-mouth disease.

Manufacturing production increased in semiconductors (3.1%), supported by high-performance memory semiconductors such as server DRAM, but decreased by 3.8% compared to the previous month due to declines in automobiles (-27.8%) and machinery equipment (-5.9%).

Manufacturing output fell by 4.1% as decreases in automobiles and machinery equipment outweighed increases in semiconductors and telecommunications and broadcasting equipment. The average operating rate of manufacturing was 70.7%, down 4.9 percentage points from the previous month, marking the lowest level in 10 years and 11 months since March 2009 (69.9) during the global financial crisis.

Service industry production also declined by 3.5% month-on-month despite increases in finance and insurance (2.1%), due to decreases in accommodation and food services (-18.1%) and transportation and warehousing (-9.1%). Accommodation (-23.5%), food services (-15.9%), air passenger transport (-42.2%), railway transport (-43.8%), and travel agencies (-45.6%) also plummeted.

Consumption was also hit hard. The retail sales index fell by 6.0% compared to the previous month as sales of semi-durable goods such as clothing (-17.7%), durable goods such as passenger cars (-7.5%), and non-durable goods such as cosmetics (-0.6%) all declined. This is the largest drop since February 2001 (-7.0%).

An Hyung-jun, Economic Trend Statistics Officer at Statistics Korea, explained, "Retail sales decreased due to reduced outings, with semi-durable goods particularly declining. Shoes and bags sold at department stores dropped by 32.2%, clothing by 22.3%, and automobile retail sales also decreased by 22.3%." On the other hand, retail sales of food products increased by 5.4% due to reduced dining out amid the spread of COVID-19. Non-store retail sales rose by 8.4%, similar to the 9.6% increase seen in June 2015 during the Middle East Respiratory Syndrome (MERS) outbreak.

Facility investment and construction performance also failed to avoid declines. Facility investment fell by 4.8% compared to the previous month as investments in transportation equipment such as automobiles (-15.4%) and machinery such as computers and office equipment (-0.1%) decreased. Construction performance (constant prices) dropped by 3.4% due to a decrease in building construction (-5.2%) despite an increase in civil engineering (1.3%).

The 'coincident index cyclical component,' which reflects the current economic situation, plunged by 0.7 points from the previous month. This is the largest decline in 11 years and 2 months since January 2009 (-0.7 points) during the global financial crisis. The 'leading index cyclical component,' which forecasts future economic conditions, remained steady compared to the previous month.

Officer An said, "Due to consumption contraction for infection prevention, services and retail sales significantly decreased, and industrial activity overall was weaker than the previous month due to difficulties in parts supply and sharp declines in automobiles and manufacturing caused by the spread of COVID-19. The effects of 'social distancing' and the global spread of COVID-19 will be reflected from March to April."

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