Domestic Manufacturing Supply Declines for 3 Consecutive Years... "Intermediate Goods Supply Decreases Due to Corona"

Statistics Korea Announces '2020 Q4 and Annual Domestic Supply Trends in Manufacturing Industry'

[Asia Economy Reporter Moon Chaeseok] South Korea's manufacturing index, which reflects domestic market trends, recorded a negative growth for the third consecutive year. This was due to the prolonged impact of COVID-19, which led to a contraction in domestic production activities and a decrease in the supply of intermediate goods within the country.

According to the '2020 Q4 and Annual Manufacturing Domestic Supply Trends' released by Statistics Korea on the 8th, last year's manufacturing domestic supply index stood at 103.6 (2015 base 100), marking a 0.9% decrease compared to the previous year. After a decline of -0.7% in 2018, the first since related statistics began in 2010, the index has shown a downward trend for three consecutive years.

This index represents the value of manufacturing products produced domestically or imported and supplied within the country. It serves as an indicator of domestic market trends.

Source: Statistics Korea

Domestic products decreased by 2.3%, mainly due to reductions in electronic products and primary metals. Imports increased by 2.6%, driven by growth in electronic products and machinery equipment.

Manufactured products are divided into intermediate goods and final goods. Intermediate goods include raw materials, fuels, and parts used in heavy industries such as semiconductors and automobile parts, which are inputs for other industries.

The decline in the manufacturing supply index last year was largely influenced by a reduction in the domestic supply of intermediate goods. Intermediate goods decreased by 3.4% compared to the previous year, with the decline widening from -0.2% in 2018 and -0.7% in 2019.

On the other hand, the domestic supply of final goods increased by 2.8%, supported by a rise in capital goods supply, including semiconductor manufacturing equipment. Consumer goods supply decreased by 0.3%.

Kim Bokyung, Director of Industrial Trends at Statistics Korea, explained, "The impact of COVID-19 last year led to sluggish domestic manufacturing and production activities, which affected the decrease in intermediate goods and also contributed to the contraction of consumer goods such as cosmetics and clothing."

By industry, primary metals recorded -8%, and metal processing -4.9%. Notably, the decline in primary metals was more pronounced compared to -3.9% in 2018 and -1.6% in 2019.

Conversely, machinery equipment, which includes special industrial machinery for semiconductor manufacturing, increased by 7%, marking a turnaround after three years. This recovered from declines of -6.4% in 2018 and -10.3% in 2019.

The share of imports in domestic manufacturing supply (import penetration rate) rose by 1.0 percentage point from 2019 to 27.3%.

Source: Statistics Korea

Meanwhile, in the fourth quarter of last year, domestic manufacturing supply decreased by 1.1% year-on-year due to a decline in domestic products despite an increase in imports.

Intermediate goods increased by 0.9%, driven by growth in system semiconductors and DRAM, but final goods decreased by 3.7% due to a reduction in capital goods such as container ships and power lines.

By industry, other transportation equipment (-52.2%), petroleum refining (-11.9%), and clothing and fur (-11.2%) declined, while machinery equipment (8%) increased.

The import penetration rate rose by 1.3 percentage points year-on-year to 26.8%.

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