Service Industry Hit Hard by 'COVID-19'... Largest Decline Since Index Creation (Comprehensive)

March Production and Consumption Down... Facility Investment Up 7.9% · Construction Output Up 2.6%

[Asia Economy Reporter Kwangho Lee] The real economic shockwave caused by the novel coronavirus infection (COVID-19) is intensifying. Due to stringent 'social distancing,' outings and consumption have decreased, leading to the largest decline in service industry production since the index was first compiled. The coincident cyclical indicator and leading cyclical indicator, which reflect the current economic situation, showed the largest drop since the 2008-2009 financial crisis.

According to the 'March 2020 Industrial Activity Trends' released by Statistics Korea on the 29th, total industrial production decreased by 0.3% compared to the previous month. Following -0.1% in January and -3.4% in February, this marks three consecutive months of decline.

The manufacturing sector increased by 4.6%, but the service industry decreased by 4.4%. In manufacturing, the automobile industry rose by 45.1% compared to the previous month as the parts supply issue was resolved in early March.

Hyungjun Ahn, Economic Statistics Review Officer at Statistics Korea, said, "The significant production drop in February due to parts supply issues caused a base effect. The automobile individual consumption tax reduction policy implemented from March also seems to have had an effect."

On the other hand, the service industry showed the largest decline since the statistics began. Due to social distancing, the arts, sports, and leisure sectors suffered the most, decreasing by 31.2% compared to the previous month.

Accommodation and food services (-17.7%), transportation and warehousing (-9.0%), education (-6.9%), and wholesale and retail trade (-3.3%) also could not avoid a downward trend. The finance and insurance sector increased by 2.6% compared to the previous month.

During the same period, consumption decreased by 1.0%. Semi-durable goods such as clothing, shoes, and bags fell by 11.9%, and non-durable goods such as cosmetics and foodstuffs decreased by 4.4%. Excluding the effect of a 14.7% increase in durable goods consumption such as passenger cars, which had parts supply issues in February, the consumption decline reaches 6.1%.

Facility investment increased by 7.9% compared to the previous month, with investments in machinery such as special industrial machines (8.1%) and automobiles and transportation equipment (7.2%) both rising. Construction performance, which reflects already completed construction work, also increased by 2.6%.

The coincident index cyclical component, which indicates the current economic state, fell by 1.2 points from the previous month, marking the largest decline in 11 years and 3 months. The leading index also dropped by 0.6 points, the largest fall in 12 years and 1 month.

From April, manufacturing production is expected to be hit due to the global economic lockdown effects.

Review Officer Ahn said, "In April, the impact on manufacturing production will be significantly reflected due to the spread of COVID-19 in major export countries such as the United States and Europe. After the transition to daily quarantine in May, service and retail sales will increase, and the policy effects will sequentially appear."

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