Invest KOREA

In June 2024, South Korea’s industrial activities rebounded in key sectors, including mining, manufacturing, and services production, retail sales, and capital investment.

In June, while many sectors in the mining and manufacturing industry, including automotive, saw adjustments, the industry’s overall production rebounded (May 2024→June 2024: △0.6→0.5 percent), with increased demand for IT products enabling improvements in semiconductors. In the service industry, despite an adjustment in arts and leisure (△5 percent), the hot weather boosted the industry (May 2024→June 2024: △0.8→0.2 percent) with stock trading* and real estate management and rental income rising altogether. Retail sales improved, backed by increases in durable goods (5.2 percent) and semi-durable goods (0.8 percent), while non-durable goods (△0.9 percent) were adjusted as a result of the previous month's discount events (May 2024→June 2024: △0.2→1 percent). Capital investment improved (May 2024→June 2024: △3.6→4.3 percent) due to a significant improvement in machinery, including semiconductor equipment (6.5 percent), and introduction of more aircraft (5 large aircraft). Construction completed declined slightly (May 2024→June 24: △4.4→△0.3 percent) with civil engineering projects up (6.1 percent) and building projects down (△2.3 percent). The cyclical change of coincident indexes declined due to falling service industry production and imports, while the cyclical change of leading indexes turned up, driven by an increase in construction orders and economic sentiment index.

The South Korean economy needs to be closely watched as there are potential upside and downside risks. On the production side, the improving IT industry and the prospect of a soft landing in the global economy are positive contributors. On the other hand, uncertainties in the supply chain, elections in major countries, and difficulties for small businesses are weighing on the economy. On the spending side (consumption and investment), stabilizing inflation, beginning of the peak season, and the full-scale introduction of equipment by major companies in the second half of 2024 are upside factors, while household debt, real estate PF risks, and sluggish construction orders are downside factors.

‘Exports Started Falling in June, Led by Slowdown in EV Exports'’
→ June exports decreased by 3.1 percent year-on-year as fewer EVs and auto parts were exported amidst brisk exports of hybrid vehicles. Domestic consumption in May declined by 9.8 percent year-on-year, with high interest rates and rising prices weakening consumer sentiment. May production dropped by 1.9 percent year-on-year due to a slowdown in domestic consumption and EV production.

‘ Exports Declined due to Base Effect while Production Index Continued Improving’
→ May production increased by 10.1 percent year-on-year as major shipbuilders expanded their production capacity. Exports fell by 39.4 percent year-on-year in June, largely from the base effect of the delivery of a large number of vessels a year ago. Despite falling imports of ship equipment, the industry’s imports grew by 18.3 percent year-on-year in May, driven by a sharp increase in vessel imports. South Korea's cumulative orders up to May continued to be strong, with the country securing 5.94 million CGT, up 9.4 percent year-on-year, and a cumulative order backlog of 39.15 million CGT.

‘Production Started Falling due to Slow Exports’
→ Slow exports and capex caused the industry’s production to decline by 1.7 percent year-on-year in May, despite an increase in domestic shipments. Exports to the US and the EU continued falling and caused the industry’s exports to drop by 8.1 percent year-on-year in June, while exports to China started growing. Imports in May turned negative (8.9 percent) with domestic manufacturers postponing machinery purchases.

‘Production Continued Declining, and Weak Demands and Falling Unit Prices Caused Exports to Fall Further’
→ In May, production fell by 11 percent year-on-year due to sluggish domestic consumption and exports, and the renovation of the Pohang No. 4 blast furnace weakened capacity utilization rate. Exports in June declined by 24.3 percent from a year ago as the weak global construction industry slowed demands and caused unit prices to plummet. Imports in May decreased by 11.8 percent year-on-year, affected by sluggish domestic consumption in the country’s steel-consuming industries except shipbuilding and falling import unit prices.

‘Exports Up 8.4 percent Year-on-Year, Driven by Improvements in Export Volume and Unit Prices’
→ Production in May fell by 4.4 percent year-on-year with the country’s refineries adjusting capacity utilization to cope with falling refining margins. In June, exports increased for the fourth consecutive month on a year-on-year basis as export unit prices and volume grew together.

‘June Exports Up 3.9 percent, Backed by the Smartphone Sector Growing for Four Months in a Row’
→ In June, smartphone exports were up 2.3 percent year-on-year and exports of smartphone parts, including high-value-added camera modules, surged by 36.8 percent. May production grew by 20.5 percent year-on-year, with shipments down 11.2 percent but capacity utilization rate up 26.7 percent. May imports increased by 7.2 percent year-on-year, led by smartphones and smartphone parts.

‘Monthly Semiconductor Exports Hit Record High’
→ May exports grew by 50.9 percent year-on-year and reached USD 13.42 billion, the best record for the month of May. In May, the semiconductor production index increased by 18.1 percent year-on-year and reached 153.9 and continued a strong upward trend, but grew only slightly by 1.8 percent month-on-month.

‘All-Time High May Exports, Driven by Strong Demands for OLEDs Used in IT Devices’
→ May production increased by 10.6 percent year-on-year due to the introduction of products made by using displays. In June, the launch of new products and price increased led exports to grow by 26.1 percent year-on-year, marking the eleventh consecutive month of growth. The wider application of AI technologies in smartphones is expected to help the premium smartphone market’s recovery, which is a positive factor for production and exports.