Korea's manufacturing sector slumps to 25 years low

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Korea's manufacturing sector slumps to 25 years low

Published: 31 Jan. 2024, 12:50

KIM JU-YEON
kim.juyeon2@joongang.co.kr

Containers are stacked at Busan Port on Thursday. [NEWS1]

Korea's manufacturing sector output fell to its lowest level in 25 years in 2023 mainly due to weak demand for semiconductors amid an industry downcycle, while retail sales and investment also tumbled last year amid high interest rates, inflationary pressure and concerns over weak domestic demand.

The overall industrial output gained 0.7 percent in 2023 from a year earlier, the third straight on-year increase, but the growth slowed down from a 4.6 percent expansion in 2022, according to Statistics Korea on Wednesday.

Last year's increase came as the output from the service sector advanced 2.9 percent on-year.

But the production in the manufacturing sector tumbled 3.9 percent, the largest on-year fall since 1998, when the figure came to 6.5 percent. Korea suffered the Asian financial crisis in 1997-98.

The decrease was mainly attributable to weak demand for semiconductors. The chip output shed 5.3 percent in 2023, marking the first on-year decline since 2001.

Retail sales, a gauge of private spending, fell 1.4 percent on-year last year, as sales of food and other nondurable goods lost ground amid high inflationary pressure.

It was the largest on-year fall since 2003, when the figure came to 3.2 percent.

Facility investment also tumbled 5.5 percent in 2023 amid a real estate market slump, compared to a 3.3 percent on-year gain the previous year.

It was the sharpest fall in four years, the data showed.

In December alone, industrial output rose 0.3 percent on-month, the second monthly gain.

Compared to a year earlier, production climbed 1.1 percent as the semiconductor sector logged a 53.3 percent increase in output on rising demand.

The semiconductor industry has shown signs of a turnaround since around the second half of last year.

Retail sales, however, fell 0.8 percent on-month in December. From a year earlier, sales shed 2.2 percent.

Facility investment rose 5.5 percent on-month, but the figure marked a 5.9 percent decrease in an on-year term, the data showed.

The Korean economy grew 1.4 percent last year, slowing from a 2.6 percent expansion the previous year.

BY KIM JU-YEON, YONHAP [kim.juyeon2@joongang.co.kr]