Industrial output growth slowest in near 20 years

Industrial output is growing at the slowest rate in nearly 20 years, while facility investment dropped the most in a decade.

Other signs that the economy is in trouble include seven straight month of declines in the coincident and leading indexes.

According to Statistics Korea and the Ministry of Strategy and Finance Thursday, last year industrial output grew 1 percent compared to 2017. This is the slowest annual growth rate since 2000.

Manufacturing industry output was only able to rise 0.3 percent, while the construction industry, which is an important contributor to the domestic economy, fell 5.1 percent, with a particularly weak second half.

Facility investment was down 4.2 percent, the sharpest drop since 2009, when the number declined 9.6 percent. The government said the decline in facility investment was largely due to weakening in the semiconductor sector.

Consumption statistics were relatively strong, on the rising sales of both durable and nondurable goods. When compared to the previous year, consumption rose 4.2 percent, the sharpest increase in seven years. In 2011 consumption went up 4.6 percent.

Strength was noted at duty-free shops and online.

While traditional retail store sales were down, including those of discount marts like Emart and Lotte Mart, falling 2.8 percent, as well as those at smaller supermarkets and miscellaneous stores, falling 0.7 percent, sales of online stores were up 14.2 percent and duty-free sales surged 31.5 percent. Chinese tourists returned to the country in great numbers as a result of easing tensions over the introduction of a U.S. missile defense system.

Convenience store sales were up 8.5 percent, a trend that has been seen in recent years as the number of people living alone has been rising.

December figures weren’t comforting.

When compared to the previous year, overall output grew 0.3 percent, which is half of the 0.6 percent reported in November. When compared to the previous month, December output fell for the second consecutive month at 0.6 percent.

Manufacturing and mining output improved compared to the previous month. It also rose 1.6 percent compared to the same month the previous year, compared to November’s 1.1 percent.

December output fell 1.4 percent month-on-month, the second consecutive month of decline.

While the fall in output of automobiles was one of the major factors, down 5.9 percent compared to November, semiconductor output was also another contributing factor, as it fell 4.5 percent.

The ministry said automobile production continued to fall as exports have shrunk. Overseas and domestic demands have been weak.

Semiconductors, which have long been a positive force, started to become a drag, with production at some companies falling on weak demand.

Investment in December alone fell sharply, declining 14.5 percent year-on-year, the sharpest fall since September 2018, when it tumbled 19.2 percent. Even when compared to the previous month, it dipped 0.4 percent.

The coincident index, which shows the current economic situation when compared to the previous month, fell 0.2 points, down for nine consecutive months.

It is the longest losing streak since falling for 11 months starting September 1997, when Korea was hit by the first financial crisis.

The leading economic index fell 0.2 points compared to November, declining for seven consecutive months.

In a statement, the ministry said it will swiftly move on “big projects” so investment sentiment will improve.

“The government, if possible, is trying spend a quarter of the budget as early as possible,” Finance Minister Hong Nam-ki said Thursday.

He denied he is looking into the possibility of a supplementary budget to boost the economy.

“We’re only in January,” Hong said. “A supplementary budget is not under consideration.”

The minister said the government will be announcing export measures, mostly focusing on financial aid to SMEs.

“While finding new markets [for exports] is important, currently the most difficult issue is [SME] exporters struggling to get financial aid,” Hong said.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]