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Korea Industry March 2020

Korea: Industrial output remains upbeat in March

Industrial production, which includes output from the mining, manufacturing, and electricity and gas sectors, increased 7.1% year-on-year in March (February: +11.3% yoy). Output in the manufacturing sector—which accounts for the majority of industrial production—jumped 7.6% year-on-year (February: +11.9% yoy).

On a seasonally-adjusted monthly basis, industrial production rose 4.6% in March, contrasting February’s 3.8% fall. The reading marked the best result since February 2009. Meanwhile, the trend improved with the annual average growth of industrial production coming in at 1.9% in March, up from February’s 1.1%.

Turning to the services sector, output fell 5.0% year-on-year in March (February: +1.2% yoy). Meanwhile, on a month-on-month seasonally-adjusted basis the services sector declined 4.4% (February: -3.5% mom).

The Great Lockdown recession, should serve a stronger blow to Korea’s services sector rather than its manufacturing sector as manufacturing is a relatively less labor-intensive industry, and therefore could resume normal production levels quicker than the services sector as containment measures ease.

In the first quarter, the manufacturing sector performed relatively well with exports of Korean manufactured products surging in February and March. That being said, going forward depressed global economic activity will likely weigh on demand for Korean goods, and in turn put a dent in the manufacturing sector.

Moreover, the services sector—which accounts for roughly 60% of the economy—languished in Q1 and will likely continue to suffer due to social distancing and containment measures surrounding the pandemic. Moreover, anemic consumer confidence and the recent rise in the unemployment rate should hamper household incomes, and consequently spending on services.

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