Indicators Show Signs of Recovery, But Experts Are Cautious

The production volume of wholesale and retail businesses, a major indicator of the domestic economy, has turned uphill within nine months.

Experts analyze that the real economic indicators are proving expectations regarding economic recovery right, but many variables such as oil prices and foreign exchange currencies could dampen the economy again.

According to a report titled ”Service Business Trends in March 2005” by the National Statistical Office on May 6, production volume this March in wholesale and retail businesses increased 0.5 percent compared to last March.

This is the first increase year-on-year since June 2004. The production volume of wholesale businesses decreased 0.4 percent year-on-year, but that of retail businesses increased 2.1 percent, showing an overall increase in the two sectors. As for the production in retail businesses, the increase was witnessed in household devices and furniture (an increase rate of 10.9 percent), non-store retailing (3.8 percent), specialty retailing (3.2 percent), and coordinated retailing (0.6 percent). Volume saw a downturn in food retailing (-3.3 percent).

The production volume in the overall service industry, including wholesaling and retailing, increased 1.6 percent in March compared to the same period of 2004, the highest point since June 2004 (1.6 percent).

Of the service businesses, real estate businesses and machinery equipment rental businesses had an increase of 7.8 percent. The increase rate of production for restaurant businesses closely linked to the household economy was 1.8 percent, much higher than that of February’s decline of 9.8 percent.

Experts say it is too early to say the economy has turned around as quarterly performance of wholesaling and retailing is still in a downturn. The production volume in the first quarter of this year (from January to March) dropped 1.5 percent, showing a continuous decline for eight consecutive quarters after an increase of 1.0 percent in the first quarter of 2003.

Kim Hyun-joong, manager of the Service Industry Statistics Division at the National Statistical Office said, “Last year’s severe economic downturn made the economic indicators look like a positive sign this year,” adding, “But there has been no particular reason to raise the indicator.”

legman@donga.com