[Weekly Review] Industrial Production Up 2.1%... Business Sentiment Revived by Export Growth

Consumption down 0.8% from previous month, food and beverages & communication devices decline
Business sentiment highest in 10 years... Bank of Korea "Not yet at pre-COVID recovery level"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Thanks to strong semiconductor exports, industrial production last month increased at the largest rate in eight months. Consumption turned to a decline for the first time in three months as demand for food and beverages at home decreased due to the COVID-19 pandemic. Recently, buoyed by strong exports, the business sentiment index reached its highest level in 10 years.

◆ Total Industrial Production Index Hits Highest Since January 2000 = According to the industrial activity trends announced by Statistics Korea on the 31st of last month, total industrial production (seasonally adjusted, excluding agriculture, forestry, and fisheries) in February rose 2.1% compared to the previous month. This is the largest increase since June last year (3.9%). Industrial production, which had increased for seven consecutive months since June last year, declined in January (-0.6%) but rebounded last month. The total industrial production index reached 111.6, marking the highest level since the related statistics began in January 2000.

On the other hand, consumption decreased by 0.8% month-on-month, mainly in food and beverages and telecommunications devices. This marks the first decline in three months since November last year (-0.3%) and the largest drop in seven months since July last year (-6.1%). The easing of social distancing measures led to increased outdoor activities, reducing demand for food and beverages at home. Additionally, the base effect from strong sales of a popular smartphone released last month contributed to this decline.

◆ Business Sentiment Rebounds on Increased Expectations for Domestic Demand Recovery = The Business Survey Index (BSI), which reflects companies' business sentiment, rebounded after one month. According to the 'March 2021 Business Survey Index (BSI) and Economic Sentiment Index (ESI)' released by the Bank of Korea on the 31st of last month, the March total industry BSI rose 7 points from the previous month to 83, marking a turnaround after one month.

The March BSI is the highest level in 9 years and 8 months since recording 87 in July 2011. It also surpassed the 75 recorded in January last year before COVID-19 cases appeared domestically. However, the Bank of Korea assessed that it is still premature to say that the level before the COVID-19 outbreak has been fully recovered.

A Bank of Korea official said, "It seems that the recent strong export performance, centered on semiconductors, has had an impact. As COVID-19 no longer spreads further and the current stage is maintained, consumer sentiment is improving, and domestic demand recovery has had a significant effect."

◆ Record-Breaking March Exports, First $50 Billion Surpassed This Year = According to the Ministry of Trade, Industry and Energy on the 1st, exports in March amounted to $53.83 billion, up 16.6% compared to the same period last year. Exports rebounded by 3.9% in November last year and have increased for five consecutive months.

Exports exceeded $50 billion for the first time this year, ranking third in monthly export value and the highest ever for March. The export growth rate is the highest in 2 years and 5 months since October 2018.

Major export items continued their strong performance. Among the 15 key items, 14 increased except for displays (-1.1%), marking the first time in 9 years and 1 month. Semiconductors rose 8.6%, increasing for nine consecutive months.

Export value reached $9.51 billion, the highest in 2 years and 4 months. Automobiles (15.3%) increased exports for three consecutive months, and bio-health (43.6%) exports rose for 19 consecutive months. Imports in March were $49.65 billion, up 18.8%. The trade balance recorded a surplus of $4.17 billion, achieving an 11-month consecutive surplus.

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