Production, Consumption and Investment Down in Korea

Production, consumption and facility investment all dropped for the first time since the foreign currency crisis of October, 1998.

Shipments declined while inventory stocks increased as the current and future economic status index dipped at the same time. The only positive aspect out of various industrial activity indexes released by the National Statistics Office was in the area of construction investment.

According to the “Industrial Activity Trends for May,” released by KNSO on June 27, industrial production dropped by 1.9 percent compared to the same period last year due to the negative influence of SARS and the general strikes across the nation. This reduction in industrial production is the first time seen in 15 months since last February.

The apparel and textile industries including fur marked a double-digit decrease in production holding at 30.9 percent and 14.9 percent, respectively.

The production material shipping index was down by 2.2 percent compared to the previous year while the production material inventory index was up by 12.5 percent. The increasing rate of inventories in May recorded their highest levels since April, 2001.

The average operation rate that stood over 76 percent despite the economic downturn also nosedived to a low of 73.9 percent since December, 2001.

The NSO explained that the slowdown in the automobile industry has been the greatest factor in bringing about the current situation.

Wholesale and retail businesses fell to their lowest levels in four and a half years. Their increasing rates year-on-year were -1.8 percent in February, -3.0 percent in May, -4.3 percent in April and -4.6 percent in May, reflecting the worsening situation in domestic demand. Automobile sales, in particular, fell by 20.7 percent.

With the steadily worsening economy, consumers are looking for bargains and sales offered by large discount stores, which have shown an increase in sales by 8.5 percent.

Facility investment dropped by 8.9 percent showing the largest drop in 21 months.

On the other hand, investment in construction saw some improvement with a 16.4 percent increase in performance and a 37.0 percent increase in orders.

The circulating fluctuation range for the current economic situation index, which shows the current economic status, stood at 98.4, down by 0.7 points from the previous month.

The figure has been on the decline for the fourth consecutive month.

“An index showing the future economic status was recorded at negative 0.8 percent, down by 0.9 percentage points year-on-year,” said economic statistics director at the NSO Kim Min-kyung. “The economy will probably not get back on track in the near future.”

Kwang-Am Cheon iam@donga.com