Invest KOREA

In September 2023, Korea's industrial activities increased in both production and expenditure, with all four major sectors of production growing for two straight months.

In September, production of mining and manufacturing industries rose by 1.8 percent, led by semiconductors (12.9 percent) and machinery (5.1 percent, including semiconductor equipment) as the semiconductor industry improved. Supported by increases in transportation (2.2 percent) and food and lodging (2.4 percent), service industry production grew by 0.4 percent despite the end of the holiday season diminishing the leisure and hospitality sector (△4.2 percent). Despite decreases in retail sales of durable goods (△2.3 percent) and semi-durable goods (△2.8 percent), the overall retail sales increased by 0.2 percent as the Chuseok holiday pushed up the sales of nondurable goods (2.3 percent). Capital investment jumped by 8.7 percent to grow rapidly for the second consecutive month, led by improvements in machinery [special industrial machinery] (7.3 percent) and transportation equipment [aircraft and others] (12.6 percent). Construction of residential buildings fell (△2.7 percent), but construction investment increased for the third consecutive month, driven by significant growth in civil engineering projects (20.0 percent). The cyclical change in the coincident index decreased for four straight months (2.5 percent) due to shrinking retail sales and imports, but the decline was 0.1 percent narrower than the previous month. Signs of an economic rebound have gradually grown, but uncertainties remain. On the production side, positive signs include the recent improvement in exports, the solid recovery of the US economy, and the growing number of foreign tourist arrivals, but the escalating tensions in the Middle East, volatility in international oil prices, and the possibility of prolonged high interest rates in major economies are weighing on the economy. Consumption and investment are supported by the favorable employment situation, accumulated household savings, and investment cooperation with major countries resulting from active summit diplomacy, but also burdened by sluggish construction orders and household debt burdens, as well as growing uncertainties in prices at home and abroad.

‘Exports Continued Growing, But at a Slower Pace’
→ In September, domestic consumption decreased by 6.3 percent year-on-year due to the Chuseok holiday reducing business days and weaker consumer sentiment. Exports increased by 5.6 percent from a year ago in September as the country exported more eco-friendly cars. Imports in August decreased by 26.1 percent year-on-year to decline for the second consecutive month, as fewer finished vehicles were imported. Production in August continued to increase, led by increases in the production of high value-added vehicles such as eco-friendly cars and SUVs.

‘All Major Indicators Improved with Brisk Production Activities’
→ In August 2023, the production index rose by 12.4 percent year-on-year, and the production indicator improved as shipments and capacity utilization rate rebounded from stagnation, with shipments and capacity utilization rate growing by 4.6 percent and 3.0 percent, respectively. Exports rose by 15.4 percent in September, driven by increased deliveries of high-value vessels such as large container ships and gas carriers. Imports rose by 45.3 percent year-on-year in August as the country imported tankers from the Middle East.

‘Domestic Consumption Slump Worsened, and Exports Grew for Six Straight Months’
→In August, production fell by 12.7 percent year-on-year as domestic consumption shrank further despite an increase in exports. In September, exports increased by 9.8 percent from a year ago on the back of rising demand for machinery investment and an increase in the number of working days (+2.5 days). Imports in August decreased by 10.3 percent year-on-year, weighed down by further weakening of domestic consumption.

‘Base Effect Eased Production Decline, and Exports Rebounded’
→ In August, steel production fell by 0.8 percent year-on-year as the sluggish domestic construction economy diminished demands for bar steel and exports to major countries declined. In September, exports saw a year-on-year increase of 6.9 percent as the US, EU and others made further infrastructure investments and purchased more steel and some Chinese manufacturers cut production. August imports decreased by 4.1 percent year-on-year as unit prices continued falling despite growing imports from China, India, and Vietnam.

‘Year-on-Year Decline in Exports Reduced to Single Digits on Higher Oil Prices’
→August production fell by 14.5 percent due to the routine maintenance of domestic players, while inventories rose by 1.6 percent. In September, higher oil prices helped reduce the year-on-year decline in exports to single digits, but exports still fell by 6.8 percent due to lower refining margins and reduced export volumes.

‘Decline in Exports Narrowed Significantly YoY in September to -3.1 percent, Raising Expectations of a Rebound in Q4’
→After the non-face-to-face trend triggered the rapid growth of ICT product sales, the global smartphone market has been experiencing a decline in demand for the past two years, affected by global supply chain disruptions, high inflation and high interest rates. With the arrival of the seasonal peak in the second half of the year, smartphone shipments are expected to recover in Q4, supported by inventory depletion of major smartphone makers and base effects. After posting a 12.6 percent year-on-year decline in Q2, production turned up by 1.0 percent in August, and shipments increased by 6.8 percent as exports improved. In August, the number of Korea’s mobile communication subscription lines grew by 3.4 percent year-on-year and by 0.2 percent month-on-month, while the number of subscriber-based terminals (tablets, wearable devices, etc.) increased by 11.4 percent and the number of communication lines for IoT devices grew by 2.4 percent year-on-year. August imports fell by 34.3 percent from a year ago, due to diminished imports of smartphones and parts.

‘Semiconductor Industry Passing the Trough’
→ In August, semiconductor production rebounded to an 8.3 percent year-on-year increase, and also grew significantly from the previous month (by 13.4 percent). September exports reached USD 9.9 billion, the highest record in 2023, and the year-on-year decline also slowed significantly to 13.5 percent. Korea’s semiconductor exports are improving, but the prospect of the industry’s dramatic rebound remains unclear.

‘Exports Rebounded on New Smartphone Launches’
→Production continues to decline in August as the economic slowdown weakened demands. In September, panel exports increased by 4.2 percent backed by the end of the price fall, and exports continued to grow. Demands continued to decline due to the ongoing economic slowdown, but the release of new products by major makers is expected to boost exports.