Korea: Industrial production reverses in January
February 28, 2020
Industrial production, which includes output from the mining, manufacturing, and electricity and gas sectors, declined 2.4% year-on-year in January, contrasting December’s 6.2% surge. This was mainly because output in the manufacturing sector—which accounts for the majority of industrial production—decreased notably in January.
In month-on-month and seasonally-adjusted terms, industrial production fell 1.3% in January, contrasting the 3.7% jump in December. Meanwhile, the average factory capacity utilization rate increased to 75.8% in January from 75.2% in the prior month.
Separately, the services sector grew 0.7% year-on-year in January, which was down from December’s 2.5% expansion, due to a dip in output in the wholesale and retail trade sector.
Going forward, a supportive fiscal stance, an expected recovery in global demand for tech and a bustling 5G network industry should prove supportive this year. That being said, COVID-19 has weighed massively on the global economic growth outlook, and consequently demand for Korean manufactured goods and poses a significant downside risk to the outlook. Moreover, Korea has a significant amount of confirmed cases, which will likely result in factories and businesses closing for a prolonged period. This should hammer the industrial sector in the first half of this year, with the chance of a sharp rebound in activity in H2 fading rapidly.
Author: Steven Burke, Economist