Amid escalating uncertainty, output, spending, investment drop in April

SEJONG -- South Korea suffered a “triple” decline in industrial output, consumption and investment in April amid expanded economic uncertainty from global inflationary pressure and a glitch in supply, state data showed Tuesday.

According to Statistics Korea, industrial output decreased by 0.7 percent in April on-month, private consumption (also called retail sales) by 0.2 percent and facilities investment by 7.5 percent.

This marked the first simultaneous decline in the three sectors since February 2020, when COVID-19 initially hit the local economy.

Though industrial output posted a bounce back in March with a 1.6 percent climb after recording a second consecutive decline in January and February, it fell again in April due to a decline in the manufacturing segment.

The manufacturing segment saw output decline by 3.1 percent on-month. A 3.5 percent fall was seen among chipmakers, 5.4 percent among food and beverage producers and 4.9 percent among metal processing firms.

Data showed that inventories increased in petroleum refining by 13 percent, machinery by 2.6 percent and semiconductors by 0.6 percent in the month.

Nevertheless, output in the service segment rose by 1.4 percent on-month on the back of eased social distancing. A 11.5 percent climb was reported in lodging-food service and 13.3 percent in arts-sports-leisure.

In the private consumption sector, retail sales declined by 17.6 percent among duty-free stores and by 2.9 percent among supermarkets. These led to an overall fall of 0.2 percent in the sector.

Consumption, which posted a 2.2 percent climb in December 2021, has shown lackluster performance this year. It fell by 2 percent in January, recorded zero percent growth in February and fell by 0.7 percent in March.

Facilities investment dropped by 7.5 percent in April, greater than the 2.2 percent on-month decline in March. Investment declined for the third consecutive month, as businesses including chipmakers have delayed investments amid a glitch in global supply and a spike in prices of raw materials.

Meanwhile, the main index gauging the current economic situation fell for the second consecutive month in a possible sign that economic growth momentum may have peaked, Statistics Korea data showed.

The cyclical component of the composite coincident index, which reflects the current economic situation, fell by 0.3 points on-month to 102.1. The index, which predicts the turning point in business cycles, also fell by 0.3 points to 99.3, extending its losing streak for 10 months straight.

A Statistics Korea director general said that “the uncertainty about the economic outlook remains high, as downside and upside risks are mixed.”

Nonetheless, the lifting of virus curbs, the implementation of an extra budget and major firms’ massive investment plans could serve as upside momentum for economic growth, he said.

A core negative factor which is undermining the economy involving consumption is the high inflation rate over the past several months.

On an on-year basis, the growth of consumer prices posted 3.6 percent in January, 3.7 percent in February, 4.1 percent in March and 4.8 percent in April, according to the state agency.

Some market insiders say that the inflation rate is estimated to have exceeded the 5 percent mark in May.

By Kim Yon-se (kys@heraldcorp.com)