Industrial output inches up, consumption dips in July

South Korea’s industrial output inched up in July but consumption slipped as the COVID-19 pandemic continued and disaster relief funds were mostly exhausted by June, data showed Monday.

The overall industrial production for July increased 0.1 percent from a month earlier, extending the on-month rise for two months straight but slowing from the 4.1 percent on-month gain observed in June, according to data compiled by Statistics Korea. The latest figure, however, was down 0.7 percent from a year earlier.

Production in the mining, manufacturing, gas and electricity industries rose 1.6 percent on-month in July, while in service industries it marked a 0.3 percent on-month rise.

Leading the manufacturing index was the automobile business, which saw exports climb 14.4 percent on-month. In the services sector, production in finance and insurance businesses rose 2.2 percent on-month.

Retail sales, in contrast, plunged 6 percent on-month and turned into a downtrend for the first time since the 0.9 percent on-month contraction in March.

The sales of durable goods such as cars fell 15.4 percent, while those of nondurable ones such as cosmetics slipped 0.6 percent.

The statistics office attributed the consumption decline in July to the government’s disaster relief funds, which were mostly used up by June.

“Since the outbreak of COVID-19, industrial indexes have mostly been dependent on the epidemic spread situations,” said Ahn Hyung-joon, an economic statistics official at the office.

“As the special consumption tax reduction was scaled down in June and 90 percent of the disaster relief funds were used up in May-June, consumption (in July) took a downturn as a result.”

In May, the government provided unprecedented relief handouts worth 14.3 trillion won ($12.07 billion) to all households in an effort to alleviate the economic fallout of the coronavirus, which had had its heaviest impact on the Korean economy in March and April.

Asia’s fourth-largest economy contracted 3.3 percent on-quarter in January-March, marking the sharpest fall in more than two decades.

Meanwhile, the cyclical component of the composite leading index -- which preemptively indicates the turning point in business cycles -- rose by 0.4 point on-month to 100.3 in July.

By Bae Hyun-jung (tellme@heraldcorp.com)