"Itaewon Tragedy" November Consumption Down 1.8%... Negative for 3 Consecutive Months (Comprehensive)

Consumption Down 1.8% Last Month Due to Itaewon Tragedy
Service Industry Production Declines...Accommodation and Restaurants Down 4%
Semiconductors Also Weak...Manufacturing Operating Rate at 73.1%

[Asia Economy Sejong=Reporters Kim Hyewon and Lee Junhyung] As COVID-19 subsides, consumption, which had been recovering, continued its sluggish trend for the third consecutive month. Due to the economic slowdown and weakened consumer sentiment, service sector production has also declined for three months in a row. Industrial production, which had been declining for four months, slightly rebounded within a stable range for the first time in five months, supported by a strong automobile industry.

According to the 'November Industrial Activity Trends' released by Statistics Korea on the 29th, retail sales (seasonally adjusted) decreased by 1.8% compared to the previous month. The retail sales index, which reflects consumption trends, has been declining for three consecutive months following September (-2.0%) and October (-0.2%).

By sector, durable goods (-1.4%), semi-durable goods (-5.9%), and non-durable goods (-0.5%) all showed weakness. This is analyzed as a result of the national mourning period declared last month due to the Itaewon tragedy at the end of October, which dampened consumption related to face-to-face services. Additionally, relatively warm weather in early winter in November reduced demand for winter clothing (semi-durable goods) and heating appliances (durable goods).

Impact of the 'Itaewon Tragedy' and Others

Accordingly, service sector production in November decreased by 0.6% compared to the previous month. Service sector production, along with consumption, has declined for three consecutive months in September (-0.1%), October (-1.1%), and November.

The largest decline was in arts, sports, and leisure industries (-5.0%). Due to the Itaewon tragedy, accommodation and food services decreased by 4% compared to the previous month, with accommodation services down by 7.5% and food and beverage services down by 3.5%. Production in accommodation and food services has declined for two consecutive months following October (-0.8%). The magnitude of the decline is the largest since December last year (-10.9%).

The coincident index, which reflects the current economic situation, fell by 0.7 percentage points compared to the previous month, marking its first decline in seven months. The scale of the decline is the largest in 30 months since May 2020 (-0.8 percentage points), during the early spread of COVID-19.

The outlook is also not optimistic. The leading index, which predicts future economic conditions, decreased by 0.2 percentage points, marking five consecutive months of decline. Eo Unseon, Director of Economic Trend Statistics at Statistics Korea, explained, "Consumer sentiment turned upward after three months but is still below the baseline," adding, "We need to monitor the situation, but since the coincident index has turned downward, there is room for interpretation that the economy has reached a turning point."

Semiconductor Production Down 11%

The semiconductor sector's weakness supports this outlook. Semiconductor production last month decreased by 11% compared to the previous month. Despite strong performances in automobiles (9%) and machinery equipment (6.4%), overall manufacturing production increased by only 0.4%. Semiconductor shipments fell by 20.3%, while inventories remained stable (0.0%). A Ministry of Economy and Finance official stated, "The semiconductor industry's downturn is worsening export and investment conditions," adding, "Continued export declines and semiconductor inventory accumulation are future burdens."

The average operating rate in manufacturing remains in the low 70% range. Last month, the average operating rate was 73.1%, up 0.6 percentage points from the previous month. The rate had maintained the mid-70% range until September but dropped to 72.5% in October and has not risen back to the mid-70% range since. Manufacturing inventories increased by 1.4% compared to the previous month, mainly due to increases in automobiles (6.2%), primary metals (3.4%), and electronic components (8%).

The government plans to expedite the execution of 65% of next year's budget within the first half of the year to stimulate the economy. On the same day, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho chaired an emergency economic ministers' meeting and said, "Since our economy is expected to show a 'low in the first half, high in the second half' pattern next year, we will push for rapid execution of more than 65% of next year's budget in the first half, the highest level ever, to actively respond to the economy," adding, "We will designate job creation, welfare, and price stabilization projects directly related to people's livelihoods as priority management targets and conduct thorough inspections."

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