Invest KOREA

In February 2024, Korea's industrial activities increased for the fourth consecutive month across industries, showing a more significant sign of an economic recovery.

Production in the mining and manufacturing industries started growing again in February due to increased production of semiconductors and semiconductor equipment, as well as increases in production in a number of industries, including automotive (△1.5 in Jan. 2024 → 3.1 percent in Feb. 2024). Service industry production increased (△0.2 in Jan. 2024 → 0.7 percent in Feb. 2024) thanks to improvements in face-to-face services, including accommodation and food (5.0 percent), leisure and hospitality (7.4 percent), and transportation and warehousing (1.6 percent). Retail sales fell (1.0 percent in Jan. 2024→ △3.1 percent Feb. 2024) due to declines in durable goods (△3.2 percent) and non-durable goods (△4.8 percent) despite an increase in semi-durable goods (2.4 percent). Capital investment rose sharply month-on-month (+5.9 percent in Jan. 2024 → +10.3 percent in Feb. 2024), led by improvements in transportation equipment (+23.8 percent) and machinery (+6.0 percent). Following the previous month's large gains, completed construction projects decreased in both building construction (△1.8 percent) and civil engineering projects (△2.2 percent), but the sector performed better than expected (13.8 percent in Jan. 2024 → △1.9 percent in Feb. 2024). The cyclical change in the coincident index rose for two straight months, driven by increases in the production of construction and service industries. The cyclical change in the leading index turned upward, supported by increases in inventories, machinery exports, and stock prices. The Korean economy is showing signs of a recovery led by production and exports, and the positive signs are gradually spreading to domestic consumption. However, upside and downside risks remain. On the production side, the rebound in the IT industry, the expectations of a major upward cycle in the semiconductor sector, and the prospect of the global economy making a soft landing are positive. At the same time, geopolitical unrest, supply chain risks, and uncertainties in monetary policies are weighing on the economy. On the spending side (consumption and investment), an increase in international arrivals, a full-fledged provision of EV subsidies, and plans to expand investment in new industries are upside factors, while household debt, real estate project financing (PF) risks, and sluggish construction orders are downside factors.

‘February Auto Exports Decreased Year-on-Ear Despite Having Recorded the Second-Largest Volume in History’
→ February exports decreased by 6.2 percent year-on-year due to base effect and lower production. Despite strong sales of domestic cars, domestic consumption decreased by 0.3 percent from a year ago in January as fewer imported vehicles were registered. Production in January increased on a year-on-year basis, driven by higher output from longer operating days and strong exports. Whereas imports of ship parts grew by 35.7 percent, overall imports decreased by 13.1 percent in January, led by a 25.5 percent decline in imports of cargo ships.

‘Weak Production Indexes Continued, but Exports Rose for Seven Straight Months’
→ In January, production and shipments decreased by 6.9 percent and 16.1 percent year-on-year, respectively, and the capacity utilization rate plunged by 17.9 percent despite an increase in production capacity, causing all major production indicators to fall. Despite the decline in production and shipments, exports increased by 27.7 percent in February as ships ordered at high prices and high-end offshore plants were delivered. In January, Korea won 38 percent of all orders placed around the world and ranked the world’s No. 2, despite uncertainties in the marine transport market caused by high interest rates, the Red Sea crisis, and China’s sluggish economic growth.

‘Production Turned Upward and Exports Grew for Ten Straight Months, But Slowed to 1.3 percent’
→ General machinery production increased by 1.3 percent year-on-year in January as domestic consumption and exports performed better. In February, exports grew by 1.2 percent year-on-year, supported by strong exports to the United States and Latin America, while exports to the EU remained slow and those to China, India and the Middle East turned downward. Imports fell by 1.1 percent year-on-year in January as Korean businesses continued cutting back on their capital investment.

‘Exports Declined due to Falling Unit Prices and Production Continued Growth’
→ In January, production grew by 12.9 percent year-on-year due to the base effect of weak bar steel production in the same month of the previous year and an increase in demand for sheet metal products resulting from strong auto production. Exports in February fell by 9.9 percent from a year ago, affected by weakening export unit prices and fierce competition in the markets of the Middle East and India. In January, imports saw a year-on-year increase of 0.3 percent as increased domestic consumption of sheet metal products boosted demands and falling import unit prices in major steel importers pushed import volumes upward.

‘Exports Fell on Lower Unit Prices Resulting from Year-on-Year Declines of Oil Prices and Refining Margins’
→ Production in January increased by 5.5 percent year-on-year on strong domestic consumption and exports. February exports decreased by 3.9 percent from a year ago as unit prices fell due to sliding oil prices and refining margins. In January, production fell by 8.6 percent year-on-year and shipments decreased slightly by 2.3 percent year-on-year due to slow exports of parts, while inventories shrunk by 24.3 percent from a year ago against strong mobile phone sales. Imports in January saw a year-on-year decrease of 18.6 percent, mostly in smartphones.

‘February Exports Fell by 16.5 percent due to Delayed Increase of Q1 Smartphone Shipments’
→ Smartphone exports increased sharply by 57.5 percent year-on-year but overall exports of wireless communication devices fell due to a significant 31.9 percent decrease in exports of mobile phone parts.

‘Semiconductor Exports Up for Four Months in a Row’
→ In January, the semiconductor production index increased by 44.1 percent year-on-year to 137.5 and maintained the sharp growth. February exports reached USD 9.9 billion, up 66.7 percent year-on-year to record the highest increase since October 2017.

‘Production Increase Driven by Growing Demands for OLEDs’