Due to the 4th COVID-19 Wave... August Production, Consumption, and Investment 'Triple Decline' (Update)

Statistics Korea 'August 2021 Industrial Activity Trends'

[Sejong=Asia Economy Reporter Son Seon-hee] As the fourth wave of COVID-19 spread, production, consumption, and investment all contracted simultaneously last month. It is the first time in three months since May that all three indicators declined together.

According to the 'August Industrial Activity Trends' released by Statistics Korea on the 30th, the overall industrial production index (seasonally adjusted, excluding agriculture, forestry, and fisheries) was 111.8 (2015=100 basis) last month, down 0.2% from the previous month. As the fourth wave of COVID-19 began to spread in earnest, production turned to a 0.6% decrease in July and recorded negative growth for two consecutive months. However, the rate of decline narrowed compared to the previous month.

With strengthened quarantine measures such as restrictions on private gathering sizes and business hours, production in accommodation and food services decreased by 5.0%, and wholesale and retail trade decreased by 0.9% compared to the previous month. Due to this, overall service industry production fell by 0.6%.

Manufacturing production also declined by 0.7% compared to the previous month, despite an increase in semiconductor production (3.5%), as production decreased in electrical equipment (-5.1%) and metal processing (-5.0%).

The retail sales index (seasonally adjusted), which indicates consumption trends, was 118.5, down 0.8% from the previous month. Sales of semi-durable goods such as clothing increased by 1.8%, but sales of non-durable goods such as food and beverages (-2.0%) and durable goods such as passenger cars (-0.1%) decreased. The resurgence of COVID-19 led to a decline in food and beverage sales during the summer vacation season, and passenger car deliveries were delayed due to issues with imported car certification and parts supply disruptions.

Facility investment decreased by 5.1% compared to the previous month, with investments in machinery (-4.3%) and transportation equipment such as ships (-7.7%) both declining.

Oh Woon-seon, Director of Economic Trend Statistics at Statistics Korea, explained, "Both production and expenditure weakened compared to the previous month, showing a pause in the economic recovery trend following last month."

The coincident index of economic indicators, which reflects the current economy, remained at 101.3, unchanged from the previous month. The leading index of economic indicators, used for future economic forecasting, fell by 0.3 points to 102.4 compared to the previous month. This marks the second consecutive month of decline following July's (-0.1), with the rate of decrease widening.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated, "Since the end of July, high-intensity social distancing measures such as restrictions on private gatherings have been implemented, inevitably leading to a decline in face-to-face service industries such as food and accommodation." However, he added, "It is somewhat fortunate that despite difficult conditions, the acceleration of vaccination and improved quarantine adaptability have significantly reduced the domestic damage compared to the previous three waves."

He continued, "The upcoming fourth quarter is a very important period for strengthening the overall resilience of our economy and maximizing this year's economic performance," and said, "The government will make every effort in the fourth quarter to support vulnerable groups and crisis industries to overcome difficulties and to reignite the momentum of economic recovery that has been building so far."

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