Production, Consumption, and Investment See 'Triple Increase' After Six Months... First-Quarter Output Posts Biggest Rise in 17 Quarters (Comprehensive Report 2)

Automotive and Shipbuilding Sectors Lead Despite Semiconductor Adjustment
Government: "Policy Effects Becoming Visible Despite Adverse Impact of War"

Last month, Korea's production, consumption, and investment all rose simultaneously for the first time in six months. Despite a slowdown in semiconductors, the automotive and shipbuilding sectors led the increase in production, while the launch of new mobile phone models and a rise in the number of foreign tourists contributed to a rebound in consumption. In addition, first-quarter production posted its highest growth rate in more than four years, and the impact of the Middle East war, which broke out at the end of February, remains limited at this stage.

Production, Consumption, and Investment All Rise Together for the First Time in Six Months

Last July, cars ready for export were waiting to be loaded at the export yard in Pyeongtaek Port, Gyeonggi Province. Photo by Jinhyung Kang.

According to the "March 2026 Industrial Activity Trends" report released by the Ministry of Data and Statistics on the 30th, overall industrial production (0.3%), retail sales (1.8%), and facility investment (1.5%) all increased compared to the previous month. This marks the first time in six months, since September last year, that all three indicators have grown together. The Ministry of Economy and Finance stated, "Despite the negative impact of the Middle East war, the effects of policy measures such as supporting domestic demand recovery and revitalizing capital markets have become visible. Prompt responses, including the price cap system, have minimized the impact of the war. We will make every effort to ensure the economic recovery continues."

In manufacturing and mining, semiconductor production (-8.1%) adjusted due to a base effect following a sharp increase (28.2%) the previous month. However, automobiles (7.8%) and shipbuilding as well as other transportation equipment (12.3%) performed strongly, leading the overall increase. Production in the service sector also rose by 1.4% from the previous month, led by growth in finance and insurance (4.6%) and transportation and warehousing (3.9%). Lee Doowon, Director of Economic Trends Statistics at the Ministry of Data and Statistics, explained, "The semiconductor sector’s decline is due to a base effect from the previous month, when it posted the largest increase in five years and eight months. The underlying market conditions remain solid."

On the expenditure side, consumption (retail sales) rose 1.8% from the previous month. While sales of non-durable goods such as food and beverages fell by 1.3%, sales of durable goods increased by 9.8%. In particular, sales of telecommunications equipment surged by 30.1% thanks to new product launches. Sales of semi-durable goods also increased by 0.3%, mainly driven by duty-free purchases of bags and cosmetics by tourists. In March, the number of foreign tourists visiting Korea reached about 2.06 million, marking the highest monthly figure on record.

Facility investment rose by 1.5% from the previous month, as increased investment in transportation equipment, such as the introduction of pre-contracted aircraft, more than offset a 0.3% decrease in machinery investment, including semiconductor manufacturing equipment. Construction completed (real terms) fell by 7.3%, with both civil engineering (-13.7%) and building construction (-4.5%) seeing reduced performance. The Ministry of Data and Statistics noted that a base effect from a 13.0% increase in February also played a role. The coincident composite index, which reflects current economic conditions, rose by 0.5 points from the previous month, while the leading composite index increased by 0.7 points.

First-Quarter Production Posts Largest Increase in 17 Quarters... Middle East Impact Still Limited

On a quarterly basis, all-industry production grew 1.7% in the first quarter, the highest rate since the fourth quarter of 2021 (2.7%), marking the largest increase in 17 quarters. Manufacturing and mining rose by 2.7%, and the service sector increased by 1.2%. Consumption (2.4%), facility investment (12.6%), and construction completed (1.2%) also climbed. This is the first time in 11 quarters, since the second quarter of 2023, that all six key indicators of industrial activity (all-industry, manufacturing and mining, service sector, consumption, facility investment, and construction completed) have risen together.

While there was some impact from the Middle East war, an external variable, it did not significantly affect the overall indicators. Petroleum refining production fell by 6.3% from the previous month, reflecting a combination of factors including the war, seasonal effects, and government policies such as naphtha export restrictions. In the transportation and warehousing industry (3.9%), higher shipping rates and increased export volumes were reflected, while the waste management sector (3.0%) saw an increase in processing volumes due to rising raw material prices. Director Lee commented, "Despite the war, the overall economic trend has been maintained. However, the full impact may become apparent in the indicators for April and May, so we need to closely monitor developments moving forward."

The government explained that the expansion of the growth trend seen since the second half of last year, confirmed in the first quarter's GDP growth rate (1.7%), is being reaffirmed by the industrial activity trends. To ensure this economic recovery continues, the government plans to promptly disburse support funds for those affected by high oil prices and to steadily implement previously announced measures such as the "Eco-friendly Green Consumption and Tourism Boom-up" and "Youth New Deal Promotion Plan." Additional measures, such as the second-half economic growth strategy, will also be prepared in advance as needed.

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