Industrial production in July remained flat compared to the previous month. Consumption fell by over 2%, and construction investment also decreased. In contrast, facility investment rose by 7.5%, driven by increased spending on semiconductor manufacturing equipment and transportation equipment such as aircraft and ships.
According to the 'July Industrial Activity Trends' report released by the national data agency on August 31, total industrial production in July was 120.2 (2020=100), showing no change from the previous month. While production in the services and construction sectors declined, increases in manufacturing and public administration production kept overall output stable.
Manufacturing output increased by 0.2% from the previous month, influenced by a rise in the production of electronic components and primary metals. The production of electronic components grew due to increased output related to OLED technology. However, automotive production fell by 4.5%, and other transportation equipment saw a 5.0% decline.
The decrease in automotive production was partly due to a base effect from increased output in June. Lee Do-won, a statistics officer, noted, "The supply of parts improved after a fire, leading to a significant increase in passenger car production in June, which resulted in a decrease this month due to the base effect."
Strikes in the automotive industry also contributed to the production decline. However, Lee clarified, "The strikes are not the main cause but rather one of several factors," adding that the base effect appears to be the primary reason.
Production in the services sector dropped by 1.3% from the previous month, with declines in finance, insurance, and professional, scientific, and technical services. The finance and insurance sector saw a 4.8% decrease, impacted by a reduction in stock trading volumes. Lee indicated that the finance and insurance sector's contribution to the overall decline in service production was 0.87 percentage points.
Consumption also decreased, with July retail sales falling by 2.4% compared to the previous month. Sales of durable goods, including automobiles and electronics, dropped by 7.7%, while semi-durable goods like clothing fell by 1.4%, and non-durable goods decreased by 0.1%. Year-on-year, retail sales were down by 0.8%.
The decline in sales this month followed a significant increase in automotive and durable goods sales last month. Lee explained, "Last month, there was an increase in automotive production and durable goods, but this month, the opposite effect was observed." Sales of electronics also decreased as promotional events ended.
Facility investment saw a substantial increase, rising by 7.5% in July compared to the previous month. Investment in machinery grew by 4.2%, while transportation equipment investment surged by 15.4%. Year-on-year, facility investment increased by 24.9%.
Lee noted, "This month, investments in semiconductor manufacturing equipment, as well as in aircraft and ships, increased, contributing to the overall 7.5% rise in machinery and transportation equipment investment."
Construction investment continued to decline, with construction output down by 1.1% from the previous month and 3.2% year-on-year. A significant factor was a 7.4% decrease in building construction performance compared to the previous month. New construction orders plummeted by 34.0% year-on-year, with civil engineering orders down by 55.0% and building orders down by 23.2%.
Economic indicators showed some improvement. The coincident composite index's cyclical fluctuation value rose by 0.8 points to 101.2, while the leading composite index's cyclical fluctuation value increased by 0.4 points to 104.2.
The government noted that external uncertainties, such as the Middle East conflict, continue to pose challenges, alongside persistent issues like inflation and declining youth employment.
A Ministry of Economy and Finance official stated, "We will strengthen policy efforts to solidify the recovery trend and ensure that the benefits of growth are widely distributed. We will promptly implement measures to restore youth employment and support vulnerable borrowers, as well as enhance support for sectors in need of stability."
* This article has been translated by AI.
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