Industrial Production Declines for the First Time in 20 Years Due to COVID-19 Impact... 'Recovery' Expected in December (Comprehensive)

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] Due to the impact of COVID-19, the annual total industry production index declined last year for the first time since statistics began in 2000. However, in December, all related indicators showed signs of improvement.

On the 29th, Statistics Korea announced the "December 2020 and Annual Industrial Activity Trends" report containing these details. The total industry production index (original index, excluding agriculture, forestry, and fisheries) decreased by 0.8% compared to the previous year, marking the first negative record since the statistics began in 2000. The service sector index recorded its first-ever negative (-2.0%) due to the COVID-19 crisis severely impacting transportation and warehousing, accommodation, and food services.

◆ Collapsed Service Industry... Financial, Insurance, and Real Estate Sectors Show Bright Spots = Looking at the sectors, manufacturing production increased by 0.5%, driven by semiconductors (23.9%) and machinery equipment (5.5%), while automobiles decreased (-10.2%). Mining and manufacturing production, which includes manufacturing, rose by 0.4%.

The service industry, hit hard by COVID-19, declined by 2.0%. Accommodation and food services (-18.5%), transportation and warehousing (-14.2%), and arts, sports, and leisure (-33.0%) slipped, whereas real estate (5.6%) and finance and insurance (14.0%) sectors showed favorable performance due to market price increases.

Retail sales decreased by 0.2%, marking the largest drop since the 2003 credit card crisis (-3.1%). Durable goods such as passenger cars increased by 10.9%, but semi-durable goods like clothing (-12.2%) and non-durable goods such as cosmetics (-0.4%) sales declined.

Among key indicators, facility investment rose by 6.0%, turning positive for the first time in three years. The increase was largely influenced by investments in machinery such as special industrial machinery (8.6%). Construction output fell by 2.3% year-on-year due to poor performance in building construction, while construction orders increased by 15.8%, driven by factories and warehouses.

Kim Bokyung, head of the Industrial Trends Division at Statistics Korea, explained, "In 2020, the service industry significantly declined due to COVID-19, which led to an overall decrease in total industry. The effect of disaster relief funds is reflected in retail sales."

◆ December Sees 'Triple Increase' in Production, Consumption, and Investment = In December, production, consumption, and investment indicators all rose, recording a 'triple increase.'

Although the increase was smaller than the previous month (0.8%), total industry production grew by 0.5%. Manufacturing production rose by 3.7%, leading to a 3.7% increase in mining and manufacturing production. November's mining and manufacturing production was 0.3%. Similar to the annual indicators, semiconductors (11.6%) and machinery equipment (10.0%) increased, while automobiles (-8.6%) decreased. However, due to strengthened social distancing measures amid the third wave of COVID-19, service industry production declined by 1.1%, marking the first negative turn in four months since August (-1.0%). Notably, accommodation and food services (-27.3%), transportation and warehousing (-3.2%), and arts, sports, and leisure (-15.8%) showed significant decreases.

Consumption also showed signs of improvement. Retail sales increased by 0.2%, rebounding after declines in October (-1.0%) and November (-0.9%). Semi-durable goods such as clothing (-6.7%) and durable goods like passenger cars (-1.7%) decreased, but non-durable goods such as food and beverages (3.9%) sales increased.

Facility investment rose by 0.9%, influenced by increased investments in transportation equipment such as ships (3.4%) and machinery including special industrial machinery (0.2%).

While the coincident index of economic indicators, which has risen for six consecutive months, remained flat, the leading index of economic indicators rose by 0.5 points, marking seven consecutive months of increase. This is the longest continuous rise since the nine-month increase from November 2016 to July 2017.

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