May Consumption Turns Down After Two Months... Largest Drop in 10 Months (Update)

May Industrial Activity Trends

[Sejong=Asia Economy Reporters Son Seon-hee, Moon Chae-seok] Consumption, which seemed to be recovering earlier this year, appears to be slowing down again.

According to the 'May Industrial Activity Trends' released by Statistics Korea on the 30th, the retail sales index last month recorded 118.3 (seasonally adjusted, base year 2015=100), showing a 1.8% decrease compared to the previous month. This is the largest decline in 10 months since the second wave of COVID-19 began in July last year (-6.1%). The retail sales index had increased for two consecutive months in March and April, raising expectations for domestic demand recovery, but it turned to a decline again after two months.

Durable goods consumption, including passenger cars, increased by 1.0%, but sales decreased in semi-durable goods such as clothing (-8.8%) and non-durable goods such as food and beverages (-0.4%).

By business type, compared to the same month last year, sales decreased in supermarkets and general stores (-13.6%) and specialty retail stores (-3.7%), while sales increased in non-store retailing (12.2%), duty-free shops (48.5%), department stores (18.2%), passenger car and fuel retail stores (1.8%), large discount stores (3.6%), and convenience stores (1.4%).

Oh Woon-seon, Director of Economic Trend Statistics at Statistics Korea, explained, "Sales of summer clothing decreased due to frequent rainfall and abnormal low temperatures in May," adding, "The base effect from the two consecutive months of retail sales increase recently also played a role."

Last month, total industrial production decreased in manufacturing, construction, and service sectors, but increased in public administration, resulting in a 0.1% increase compared to the previous month. The average operating rate of manufacturing remained at 73.8%, the same level as the previous month.

Industrial production decreased by 0.7% month-on-month as production increased in semiconductors (5.3%) but decreased in automobiles (-6.6%) and machinery equipment (-5.6%). Statistics Korea explained that the decline in automobile production was due to "production cuts caused by recent supply disruptions of vehicle semiconductors and other parts." The decline in machinery equipment production was analyzed as "adjustments in semiconductor equipment production such as semiconductor assembly equipment and wafer processing equipment."

In the service sector, production increased in accommodation and food services (2.5%) but decreased in wholesale and retail trade (-1.3%) and finance and insurance (-1.0%), resulting in a 0.2% decrease compared to the previous month.

In the investment sector, both facility investment (-3.5%) and construction performance (-4.1%) declined. Facility investment decreased by 3.0% in machinery, including special industrial machinery reflecting imports of semiconductor manufacturing equipment, and investment in transportation equipment such as aircraft also fell by 4.5%. Construction performance declined in both civil engineering (-8.5%) and building (-2.6%) works.

The composite coincident index of economic indicators rose by 0.2 points from the previous month to 101.4, and the composite leading index increased by 0.4 points to 104.1 during the same period.

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