Consumption on Five-month Decline

The Korean economy remained in a downturn in June after suffering from decreasing consumer sentiment for five months in a row. In the meantime, as SARS (Severe Acute Respiratory Syndrome) has subdued in most of Asia, production and investment in facilities have increased, along with rising exports.

According to a report on industrial activities trend in June, released yesterday by the National Statistics Office (NSO), retail and wholesale selling, which has been on a decrease for five straight months since February this year, shrank by 2.3% year-on-year.

The decrease rate, however, dropped by half in June, after growing to mark at 1.8% in February, 3.0% in March, 4.3% in April, and 4.6% in May.

By sector, retail and wholesale sales declined by 1.2% and 5.2% respectively, whereas sales of automobiles and fuel energy recovered from three consecutive months of stagnation, growing 1.0%.

The CIHC, which monitors current economic cycles, went up from –0.7% points in May to –0.1% points in June. When the index is in the negative, the economy is assumed to be in a downturn.

Yet the PIHC, which monitors the preceding index and looks at the economic prospect for the coming months, posted 0.5 points in its most recent report, a positive return from its previous 14-month low downswing. A positive figure in the index implies the economy is soon to move to an upturn.

“An optimist would interpret the economic indicators to show slowing-down of the nation`s economic decline and to imply upturn recovery in a few months”, said NSO Manager of Industrial Trends Shin Seung-woo. He also warned, “Yet, it is premature to judge the economy only with the changes in indexes from June.“

Industrial output increased 7.8% compared with the same period last year.

By industry, production of textiles, clothing, and fur decreased while that of automobiles, semiconductors, and machinery equipment increased.

The NSO confirmed more active industrial activities in June, but still noted that the recent recovery is exaggerated in the wake of the sluggish manufacturing activities due to World Cup fever in June last year and implications of labor disputes in the auto-manufacturing sector. A more accurate judgment, the NSO believes, requires more time. Supply of material goods has risen 3.3%, driven by automobiles and oil refinery, while exports, mostly in semiconductors and cars, have jumped 17.8%.

Facilities investment went up by 2.5% aggregately, thanks to rising investment in communication devices, electrical equipment and machineries, and metal products. Inventory is estimated to grow 10.9% year-on-year.

Kwang-Am Cheon iam@donga.com