Korea: Industrial production rises at the fastest pace in 16 months in February
Industrial production, which includes output from the mining, manufacturing, and electricity and gas sectors, increased 11.4% year-on-year in February, contrasting January’s 2.6% fall. Output in the manufacturing sector—which accounts for the majority of industrial production—surged 12.0% in February, following January’s contraction.
In month-on-month and seasonally-adjusted terms, industrial production fell 3.8% in February, sharper than the 1.3% decline in January. Meanwhile, the average factory capacity utilization rate moderated to 70.7% in February from 75.6% in the prior month.
Separately, the services sector grew 1.2% year-on-year in February, which was up from January’s 0.8% expansion, due to a softer fall in wholesale and retail trade, while inventories expanded at a faster clip.
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. The recovery in global demand for tech looks to have been put on pause, as smartphone sales were down notably in March, which should hamper the manufacturing sector next quarter.
Nevertheless, the government’s ability to contain the spread at home should spark a faster recovery in industrial activity once the pandemic subsides globally. In March, the IHS manufacturing PMI survey reported there were notably less factory closures in March, than in February, which should prop up the capacity utilization rate in the coming months, boding well for employment and investment.