Production, Consumption, and Investment 'Triple' Decline... Production Hits Largest Drop Since Pandemic (Comprehensive)

Total Industrial Production Drops 2.7% in January
Negative Growth in Mining, Construction, and Service Sectors
Retail Sales Down Due to Decrease in Semi-Durable Goods
Duty-Free Shops See 41% Drop as Chinese Demand Falls
Facility Investment Plunges 14.2% on Base Effect
Construction Slump Continues to Weigh on Investment Indicators

In January of this year, all three major indicators?production, consumption, and investment?recorded negative growth rates. These three indicators were all negative in November last year, turned positive in December, but have recorded triple declines again within two months.

Looking at the recent trends in industrial activity, production, consumption, and investment have been alternating between positive and negative growth over one or two months. This indicates a lack of clear direction, with the economic situation neither significantly improving nor worsening. However, the January figures this year differ in that the decline is much larger, suggesting growing concerns about an economic downturn.

In the case of total industry production and facility investment, the decline was the largest since the COVID-19 period in 2020, and construction output has continued its negative trend since August last year, clearly reflecting a cold spell in the construction industry.

Export containers are being loaded onto a ship at Busan North Port. Photo by Jinhyung Kang aymsdream@

According to the 'January 2025 Industrial Activity Trends' released by Statistics Korea on the 4th, total industry production (-2.7%) and retail sales (-0.6%), as well as investment indicators including facility investment (-14.2%) and construction output (-4.3%), all decreased compared to the previous month.

Lee Doowon, Director of Economic Trend Statistics at Statistics Korea, explained, "Most major indicators turned negative due to the base effect from the previous month's increase and a reduction in working days caused by the long Lunar New Year holiday. In particular, production is driven by recovery centered on semiconductors, but domestic demand recovery such as consumption and construction investment is delayed due to economic sentiment contraction caused by domestic and external uncertainties."

The total industry production index in January decreased by 2.7% compared to the previous month, marking the largest decline in 4 years and 11 months since February 2020 (-2.9%) during the COVID-19 period. Total industry production also recorded negative growth in July (-0.6%), September (-0.3%), and November (-1.2%) last year, and this time again turned negative after two months, indicating a sluggish economic trend.

Production declines in mining and manufacturing (-2.3%), construction (-4.3%), and services (-0.8%) contributed to this. Mining and manufacturing turned negative again after two months since November last year (-2.5%), with notable decreases in machinery equipment (-7.7%) and electronic components (-8.1%). Looking at manufacturing alone, both production (-2.4%) and shipments (-7.4%), including domestic and export sales, decreased. In the service sector, production declines were significant in wholesale and retail trade (-4.0%) and transportation and warehousing (-3.8%).

The retail sales index, which represents goods consumption, decreased by 0.6% compared to the previous month. It showed negative trends in October (-0.7%) and November (-0.7%) last year, rebounded in December (0.2%), but returned to a decline in January. Sales of durable goods such as telecommunications devices and computers increased by 1.1%, but semi-durable goods like clothing, shoes, and bags decreased by 2.6% due to the end of year-end discount events and fewer business days during the Lunar New Year holiday.

Breaking down by retail type, duty-free shops showed a significant decrease of 41.0%, mainly due to reduced sales of cosmetics. Despite the domestic Lunar New Year holiday and the Chinese Spring Festival, which could have increased tourist demand, this was not the case. Lee explained, "The volume of cosmetics purchased by tourists arriving from China has significantly decreased, especially imports of cosmetics by intermediary traders have dropped sharply."

Facility investment plunged 14.2% compared to the previous month, marking the largest decline in 4 years and 3 months since January 2020 (-16.7%). Facility investment had decreased in October (-3.4%) and November (-1.7%) last year, surged by 7.5% in December, but turned negative again in January. The decline was due to reduced investment in semiconductor manufacturing machinery within machinery (-12.6%) and a 17.5% decrease in transportation equipment investment, which had surged 25.1% in December, showing a base effect.

Construction output decreased by 4.3% compared to the previous month due to reduced construction performance in building (-4.1%) and civil engineering (-5.2%). This was the largest decline in 10 months since March last year (-9.4%). Construction output has continued its negative trend since August last year (-2.1%), clearly reflecting the cold spell in construction. Construction orders decreased by 25.1% compared to the same month last year, marking the largest decline since January last year (-35.3%).

The coincident composite index cyclical component stood at 98.4, down 0.4 points from the previous month. The leading composite index cyclical component, which can forecast future economic conditions, recorded 100.4, down 0.3 points due to decreases in machinery domestic export-import index and construction orders.

The government plans to focus on recovering the domestic economy and supporting exports as downward pressure on the economy increases due to expanding domestic and external uncertainties. The Ministry of Economy and Finance stated, "We will swiftly implement key policy tasks of the livelihood and economic response plan in the first quarter and continue to consider additional support measures. We plan to strengthen industrial competitiveness by introducing export vouchers to respond to U.S. tariffs, providing liquidity support, and establishing a strategic fund for advanced industries."

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