September Production Up 1.3%... Consumption Surges Most in 6 Months as Vaccination Rate Increases

Statistics Korea September Industrial Activity Trends

[Sejong=Asia Economy Reporter Son Seon-hee] Last month, overall industrial production rebounded after three months. Despite the fourth major COVID-19 outbreak and global supply chain disruptions, the increase in service sector production is attributed to expanded vaccination rates and eased quarantine measures. Consumption also surged at the largest rate in six months due to the impact of disaster relief payments.

According to the 'September Industrial Activity Trends' released by Statistics Korea on the 29th, the overall industrial production index (seasonally adjusted, excluding agriculture, forestry, and fisheries) last month was 113.1 (2015=100 basis), up 1.3% from the previous month. After rising 1.6% in June, it fell 0.7% in July and 0.2% in August, marking two consecutive months of decline before increasing again after three months.

Due to rising raw material prices and global supply chain disruptions, manufacturing production decreased by 0.8%. In particular, automobile production fell 9.8% from the previous month as production was adjusted amid semiconductor supply shortages for vehicles. Additionally, production of electrical equipment, including theft alarms, fire alarms, similar detectors, and secondary battery cells, also declined by 5.2% during the same period.

Manufacturing inventories increased by 1.2% compared to the previous month. The average operating rate of manufacturing dropped by 0.6 percentage points to 73.5%.

On the other hand, service sector production increased by 1.3% from the previous month, driving overall production growth, thanks to expanded vaccination, eased quarantine rules, and the distribution of national support funds. Notably, accommodation and food services, which were severely impacted by the COVID-19 crisis, rose 10.9% from the previous month, marking the largest increase since February. Furthermore, cargo and passenger transportation, as well as warehousing and transportation-related services, increased by 4.5% due to export booms and expanded vaccination.

The retail sales index (seasonally adjusted), which reflects consumption trends, was 121.4, up 2.5% from the previous month. This is analyzed to be influenced by the easing of quarantine rules such as restrictions on gathering sizes due to higher vaccination rates, as well as the COVID-19 coexistence national support funds distributed last month.

Oh Woon-seon, Director of Economic Trend Statistics at Statistics Korea, said, "Both production and sales improved from the previous month due to the strong performance of service sector production and retail sales," adding, "The economy showed signs of recovering from two consecutive months of stagnation and continued an improving trend."

While production and consumption showed improvement, facility investment decreased by 1.0%, marking two consecutive months of decline. This was due to reduced domestic and imported investment amid semiconductor supply shortages for vehicles.

The coincident index, which indicates the current economic condition, remained unchanged at 101.2 from the previous month. The leading index, which predicts future economic conditions, fell by 0.3 points to 102.1.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated on his social media on the same day, "The revival of consumption recovery in September, the last month of the quarter, can be seen as laying the groundwork for a consumption rebound in the fourth quarter," adding, "While thoroughly managing domestic and external risks during the remaining period, we will further strengthen the economic recovery trend and focus more on restoring the livelihood economy." He also added, "In connection with improved quarantine conditions, we will steadily implement measures to boost domestic demand such as coexistence consumption support funds and consumption coupons, and ensure no disruption in efforts to reduce the burden on livelihoods, including compensation for small business losses and fuel tax reductions."

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