Invest KOREA

In May 2023, Korea's total industrial production increased by 1.3%. Led by the mining and manufacturing industries, the recovery has resumed after experiencing an adjustment in the previous month.

In May, production of mining and manufacturing industries increased by 3.2% from the previous months, with automobiles and semiconductors growing by 8.7% and 4.4%, respectively, while communication and broadcasting equipment fell by 16.9%. Service industry production fell by 0.1% month on month as wholesale and retail increased by 1.6% and food and lodging and finance and insurance declined by 4.5% and 4.1%, respectively. Retail sales rose by 0.4% from the previous month, driven by 0.5%, 0.6%, and 0.2% increases in durable goods, semi-durable goods, and nondurable goods, respectively. Equipment investment rose by 3.5% with investment in machinery, such as general industrial machinery, and transportation equipment, such as aircraft, gaining 2.6% and 6.2%, respectively. Investment in construction increased by 0.5% month on month with construction rising by 0.7% from the previous month, driven by improved progress of maintenance projects. The cyclical change in the coincident index rose by 0.1 percentage point as mining and manufacturing industries, domestic shipment index, import value, and non-agricultural and fishery employment increased. The cyclical change in the leading index turned positive, supported by increase in the economic sentiment index and KOSPI despite decreases in construction orders, inventory cycle index, and the spread between short-term and long-term interest rates. Downside risks have eased recently amid difficult domestic and international real economic conditions, but uncertainties persist. On the production side, there are positive factors such as the rebound of the IT industry in the second half of the year, expectations of the effect of China’s reopening, and the return of face-to-face activities. At the same time, there are burdensome factors such as continued global economic uncertainties caused by countries’ monetary tightening and high semiconductor inventory levels. As for consumption and investment, there are positive factors such as a favorable employment situation, a recovery in household and business sentiments, and a slowdown in inflation. However, there are risk factors such as short-term investment adjustment due to semiconductor production cuts, uncertainty in the construction industry, and household debt burdens.

‘'Strong sales of eco-friendly cars supported increases in production and exports'’
→ Driven by increases in exports and domestic consumption, April production increased by 16.6 percent year-on-year. In May, domestic consumption grew by 5.7 percent from a year ago due to expanding supply of domestic vehicles and the effect of new vehicle launches. In May, exports increased by 33.4 percent year-on-year as exports of finished cars reached USD 6 billion for the third consecutive month. Exports of finished cars rose by 49.4 percent driven by strong exports of high-end cars with high unit costs and EVs mainly in the US and the EU region.

‘'Production indicators improved for 15 consecutive months, but exports shifted to a decline due to the base effect'’
→ Shipbuilding orders are declining due to the economic slowdown, but the shipbuilding index continues to rise above 170 as major Korean shipbuilders keep receiving orders selectively. In April, imports fell by 62.3 percent due to a 90.5 percent year-on-year decrease in ships and a 57.2 percent decrease in ship engines, but imports of ship parts increased by 166.5 percent. In May, exports fell by 48.0 percent, affected by the base effect of having delivered numerous high value-added ships in the same month of the previous year.

‘'Production started declining on weak domestic consumption, but exports continued modest growth'’
→ Despite strong exports, April production fell by 3.5 percent year-on-year and 6.9 percent month-on-month due to sluggish domestic consumption. Facilities investment in machinery and orders grew compared to the same period of the previous year, but production shifted to a year-on-year decline (falling by 3.5 percent) as domestic shipment continued declining. April imports increased by 13.1 percent year-on-year to USD 2.842 billion. In May, exports grew by 1.6 percent from a year ago, supported by continued strong exports to the US.

‘'Year-on-year production fell but the decline in exports were slowed by slight recovery in export unit prices'’
→ Despite the recovery of automobile and shipbuilding industries, steel production in April fell by 1.0 percent year-on-year due to the sluggish construction industry and subsequent decrease in demand for bar steel. Imports in April decreased by 12.8 percent year-on-year despite an increase in imports from China, due to reduced imports from Japan, Taiwan, Vietnam, the US and a fall in import unit prices. May exports saw a decline of 8.8 percent year-on-year due to a fall in exports to most major customers excluding the Middle East such as China, ASEAN, and the EU, and a decrease in export unit prices.

‘'Exports fell for three straight months largely affected by falling export unit prices'’
→Production shrunk in April as domestic consumption and exports fell together. May exports reached USD 4.36 billion, down 33.2 percent year-on-year. By region, exports to China increased for the second consecutive month. Export volumes decreased by 3.3 percent from a year ago due to a decline in exports of gasoline and diesel.

‘ICT ‘May exports fell by 12.0 percent year-on-year due to delayed recovery of industries that require ICT devices’’
→ In April, production decreased by 3.4 percent year-on-year, while shipments and inventories increased by 0.6 percent and 10.8 percent, respectively, and the capacity utilization rate fell by 8.2 percent. April imports saw a decline of 27.8 percent year-on-year mostly in smartphones and smartphone parts. Since February 2023, monthly exports continue to decline year-on-year due to the weaker-than-expected effect of China's reopening and the prevailing outlook of high interest rates and sluggish global economy. While exports to China fell by 20.8 percent year-on-year and exports to Europe decreased by 22.9 percent year-on-year, exports to the ASEAN region increased by 8.1 percent year-on-year.

‘Slowdown of the semiconductor industry continued’
→ In April, semiconductor production fell by 20.2 percent year-on-year and shipments continued to decline by 32.8 percent, but the decline in production growth rate slowed. Due to the base effect of record-high exports and production in the first half of last year, year-on-year production continued to decline, but the difference has narrowed while the month-on-month performance continued improving from last month and appears to be stabilizing. May exports saw a decline of 36.2 percent year-on-year to USD 7.367 billion to fall for ten consecutive months after ending the long-term rally.

‘OLED exports boosted by growing demands for premium smartphones’
→ Production fell in April due to sluggish sales of products made with display panels. In May, LCD production cuts led to a 7.4 percent fall in panel exports, which decreased for 12 consecutive months. .