KDI "Consumer Spending Slumps Due to COVID-19 Resurgence"… Card Usage Drops Over 10% for Two Consecutive Months

February Economic Trends Published... "Manufacturing Shows Solid Growth"

On the 27th, as stringent social distancing measures to prevent the spread of COVID-19 continue, a store located in the Ewha Womans University area in Seodaemun-gu, Seoul, has closed down and posted a notice for lease inquiries. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Moon Chaeseok] The Korea Development Institute (KDI) diagnosed that the service sector's economic downturn continues due to the third wave of COVID-19.

In the 'February Economic Trends' report published on the 7th, KDI analyzed that "economic sluggishness persisted mainly in the service sector due to the resurgence of COVID-19."

Consumption-related indicators also declined. The retail sales growth rate in December last year was -2%, a larger drop compared to -1.5% in the previous month.

The sales of semi-durable goods such as clothing (-23.5%) decreased by 17.2%, which was significant. This was influenced by consumers refraining from outdoor activities as quarantine levels increased.

Consequently, credit card sales also plummeted. According to estimates by Shinhan Card, card sales last month decreased by 14.4% compared to the previous month.

Following -16.2% in December last year, it remained in the -10% range for two consecutive months. This level was similar to -16.5% in March last year during the first major wave of COVID-19.

Production in face-to-face service industries such as accommodation and food services (-39.5%) and arts, sports, and leisure-related services (-40.6%) also sharply contracted.

The Consumer Sentiment Index rose by 4.2 points to 95.4 from 91.2 in December last year.

KDI forecasted, "With strengthened social distancing measures continuing last month, consumption sluggishness is expected to persist for the time being."

The manufacturing sector maintained a favorable growth trend. Exports and facility investments continued to increase.

The average operating rate of manufacturing in December last year was 74.5%, slightly up from 73.9% in November. Shipments increased (1.2% → 2.1%) while inventory ratio decreased (107.6% → 106%).

Facility investment recorded a 5.3% growth rate, centered on machinery (13.7%). Special industrial machinery related to semiconductors (37%) showed an increasing trend.

Capital goods imports, a leading indicator of facility investment, rose by 46.1% last month. KDI predicted, "The improvement trend in facility investment is expected to continue."

Exports also showed a recovery trend. Last month, exports grew by 11.4%, marking double-digit growth following 12.6% in the previous month.

The increase was notable in high value-added items such as semiconductors (21.7%), wireless communication devices (58%), and automobiles (40.2%).

KDI stated, "It is judged that the manufacturing sector's favorable growth is partially alleviating the economic downturn."

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