February Production Down 0.2% for Second Consecutive Month... "Economic Recovery Stalls" (Update)

Statistics Korea Announces February Industrial Activity Trends

[Asia Economy Sejong=Reporter Son Seon-hee] In February, total industrial production decreased by 0.2% compared to the previous month, marking a decline for two consecutive months. This is the first time in 21 months since May 2020 that production has contracted for two consecutive months.

According to the 'February Industrial Activity Trends' released by Statistics Korea on the 31st, the total industrial production index (seasonally adjusted, excluding agriculture, forestry, and fisheries) stood at 115.5 (2015=100) in February, down 0.2% from the previous month. Production increased in public administration (3.1%) and mining and manufacturing (0.6%), but service sector production fell by 0.3% due to the spread of Omicron. Construction production also showed a decline of 8.5%.

In particular, the service sector saw significant decreases in accommodation and food services (-4.0%) and arts, sports, and leisure (-7.3%) due to the direct impact of COVID-19 spread and reduced use of multi-use facilities.

The retail sales index (seasonally adjusted), which reflects consumption trends, rose by 0.1% to 120.7 (2015=100) compared to the previous month. However, this is interpreted as a base effect following the largest consumption decline in about a year and a half last month.

Facility investment fell by 5.7%, marking the largest drop in two years since February 2020 (-6.5%).

Oh Woon-seon, Director of Economic Trend Statistics at Statistics Korea, explained, "Due to the rapid increase in Omicron cases and base effects, production in the service sector and investment indicators decreased, causing both production and expenditure to slow somewhat compared to the previous month," adding, "The economic recovery trend has stalled for two consecutive months."

The coincident composite index, which shows the current economic trend, rose by 0.2 percentage points from the previous month. However, the leading composite index, used to predict future economic conditions, fell by 0.3 percentage points for the eighth consecutive month due to factors such as the export-import price ratio and KOSPI decline.

Director Oh said, "It is clear that the inflection point (where the leading composite index turns upward) is approaching," adding, "With continued export strength and favorable consumer sentiment, there are upward factors present."

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, evaluated through his social media immediately after the industrial activity report release that "the economic recovery trend is continuing, albeit with difficulty," and stated, "We will execute this year’s budget swiftly as planned to sustain the economic recovery trend." He also added, "We will strengthen supply chain management focusing on key items by industry to ensure smooth corporate investment and focus on resolving difficulties in corporate facility investment and construction sites."

Especially with the new government inauguration scheduled for May, Deputy Prime Minister Hong emphasized, "The second quarter is a critical transition period where the current government ends and the new government begins," and pledged, "We will make every effort to ensure seamless 'baton passing' during the government transition period for stable economic management and response to domestic and external risks."

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