Impact of Omicron Pandemic... Industrial Production Declines for Second Consecutive Month This Year

February Industrial Activity Trends

[Asia Economy Sejong=Reporter Son Seon-hee] Due to the impact of the widespread COVID-19 Omicron virus at the beginning of the year, industrial production recorded a decline for two consecutive months. This is the first time in 21 months since May 2020 that production has decreased for two consecutive months. Facility investment also shrank by 5.7% compared to the previous month, showing the largest decline since February 2020.

According to the 'February Industrial Activity Trends' released by Statistics Korea on the 31st, the all-industry production index (seasonally adjusted, excluding agriculture, forestry, and fisheries) stood at 115.5 (2015=100), down 0.2% from the previous month. Production increased in public administration (3.1%) and mining and manufacturing (0.6%), but decreased in services (-0.3%) and construction (-8.5%).

In particular, the service sector saw significant declines in accommodation and food services (-4.0%), which were directly hit by the spread of COVID-19, and in arts, sports, and leisure (-7.3%) due to reduced use of multi-use facilities. The construction sector's decline is attributed to disruptions in the supply of construction materials caused by rising raw material prices.

The retail sales index (seasonally adjusted), which reflects consumption trends, was 120.7 (2015=100), increasing by 0.1% 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 decreased by 5.7%, marking the largest drop in two years since February 2020 (-6.5%).

Oh Un-seon, Director of Economic Trend Statistics at Statistics Korea, explained, "Due to the rapid increase in Omicron cases and base effects, production and investment indicators in the service sector 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 outlook remains uncertain as the impact of the Russia-Ukraine situation will be directly reflected from this month. The composite leading index's cyclical component, which indicates future economic trends, fell by 0.3 percentage points compared to the previous month due to factors such as the export-import price ratio and KOSPI decline, marking eight consecutive months of decline.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated on his social media, "Although the economic recovery is continuing with difficulty, it is very regrettable that domestic demand recovery is still constrained due to the ongoing spread of Omicron." He added, "The second quarter is a critical transition period as the current government ends and the new government begins. We will do our utmost to ensure a seamless 'baton pass' in stable economic management and response to internal and external risks during the government transition period."

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