Industrial production sees solid 4.5% growth in April

A customer shops at a discount mart in Seoul on May 30. [YONHAP]

Industrial production rose 4.5 percent in April, Statistics Korea reported Tuesday.

The on-year increase was led by the mining and manufacturing industries. April’s increase was higher than the 3.3 percent on-year rise in March.

“Uncertainties like global supply chain disruptions, rises in global raw material prices and concern over global inflation along with the Ukraine crisis surfaced,” said a spokesperson for Statistics Korea. “But the lifting of [social distancing] measures, passing of the supplementary budget and massive investments planned by companies are factors that could push up the economy.”

Industrial production is manufacturing and mining output. Manufacturing output alone rose 3.7 percent on year.

Production output for semiconductors grew 35 percent on year while that of medicine and medical supplies rose 13.2 percent. In the same period, production output for machine equipment slid 10.2 percent.

Service activity rose 5.1 percent on year. In the hotel and restaurant category, output grew 17.1 percent on year.

Retail sales increased 0.5 percent on year. Spending on semi-durable goods, which includes entertainment, hobby items, clothing and shoes, increased 5.7 percent on year. Spending on nondurable goods, including medicine and medical supplies, inched up 1.7 percent.

Facility investment was down 11.9 percent on year as investment made on machinery was down 11.9 percent. Investment on transportation equipment for aircraft also fell 11.4 percent.

Compared to the previous month, industrial production fell 0.7 percent in April. Retail sales fell for the second consecutive month, sliding 0.2 percent. Facility investment fell 7.5 percent.

It was the first time that industrial production, consumption and facility investment simultaneously declined together since February 2020.

“Investment in machinery, especially special industry machinery used to manufacture semiconductors, slowed,” said the spokesperson for Statistics Korea. Although semiconductor companies have planned to build new facilities, it hasn't been easy to get semiconductor components due to supply chain disruptions, he added.

Though major business groups including Samsung, SK and LG announced plans to increase investment, those investments are mostly planned to be made throughout the next five years, according to the Statistics Korea.

Uncertainties for the economy will continue for some time, as war between Russia and Ukraine continues and central banks raise interest rates to fight inflation.

“There are uncertainties in the flow of the economy,” said a spokesperson for the Ministry of Economy and Finance. “There are latent unstable factors that are pressuring the domestic economy, like inflation.”

Korea’s consumer price index gained 4.8 percent on year in April, the steepest rise in more than 13 years. Bank of Korea Governor Rhee Chang-yong projected the rate to reach above 5 percent in May.

But some say the recent personal consumption expenditures (PCE) index in the United States suggests inflation has peaked.

The PCE index was up 4.9 percent in April on year, down from 5.2 percent in March.

PCE is a measure of personal consumption expenditure prices excluding food and energy. It is the primary inflation index used by the U.S. Federal Reserve when making monetary policy decisions.

“The market seems to be relieved by the recent price indexes and the easing of lockdown in China,” Baek Suk-hyun, an economist at Shinhan Bank, told JoongAng Ilbo.

BY JIN MIN-JI [jin.minji@joongang.co.kr]