Industrial Production Down 0.6% in January This Year... Negative Growth for the First Time in 8 Months (Comprehensive)

Statistics Korea, January Industrial Activity Trends

[Sejong=Asia Economy Reporter Ju Sang-don] The increase in total industrial production that had continued since June last year turned into a decline in January this year. Manufacturing production contracted due to the resurgence of COVID-19, and the decline in the service sector persisted. However, consumption continued to increase for two consecutive months as 'homebound consumption' rose amid strict social distancing measures and cold waves.

According to the January industrial activity trends announced by Statistics Korea on the 2nd, total industrial production decreased by 0.6% month-on-month due to declines in manufacturing, services, and construction. This marked the first decline in eight months since May last year (-1.5%).

Oh Un-seon, Director of Economic Trend Statistics at Statistics Korea, explained, "The resurgence of COVID-19 caused a decrease in service sector production, and manufacturing shifted to a decline due to the base effect from a 2.7% increase in December last year. Overall, production contracted as a relative adjustment from the high figures of the previous month."

Manufacturing production decreased by 1.6% month-on-month, despite increases in automobiles (12.8%), due to declines in electronic components (-9.4%) and other transportation equipment (-12.4%). Other transportation equipment includes container ships and aircraft parts production.

The decline in manufacturing production was even larger, falling 1.7% month-on-month. Semiconductor production in January increased by 0.3% compared to the previous month due to strong exports, but the growth rate sharply slowed compared to 11.6% in December last year. This was the first month-on-month decline in manufacturing production in three months since October last year (-0.6%).

Service sector production decreased by 0.2% month-on-month, with increases in finance and insurance (1.3%) offset by declines in arts, sports, and leisure (-15.4%) and wholesale and retail trade (-0.8%). Retail sales, an indicator of consumption trends, rose 1.6% month-on-month as sales of durable goods such as home appliances (4.8%) and semi-durable goods such as clothing (1.0%) increased, although non-durable goods like pharmaceuticals (-0.1%) declined. This was the largest increase since August last year (3.0%). Statistics Korea analyzed that consumption increased due to more indoor activities amid COVID-19 and the overlapping winter cold wave. Facility investment rose 6.2% month-on-month, while construction output decreased by 6.0%.

Assessments and forecasts of the current economy were mixed. The coincident index cyclical component fell 0.2 points month-on-month to 99.5, ending a seven-month consecutive rise that lasted until December last year. The leading index cyclical component rose 0.3 points month-on-month to 102.7, marking an eight-month consecutive increase. This is the longest consecutive rise since the 12-month increase from February 2009 to January 2010.

However, it is difficult to confidently say that the upward trend of the leading index cyclical component will continue. Director Oh said, "Financial indicators such as the KOSPI index and the short- and long-term interest rate spread have led the rise in the leading index, but recently there has been some divergence between financial and real indicators. Since future economic outlooks depend on the COVID-19 situation, it is appropriate to view them cautiously."

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