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Korean industrial production falls most in five years on car crunch

Published: 04 Mar. 2025, 18:39 Updated: 04 Mar. 2025, 18:41

SHIN HA-NEE
[email protected]

Shoppers browse a duty-free store in Jung District, central Seoul, on March 4. [NEWS1]

Korea’s production, consumption and investments all contracted in the beginning of 2025, with production falling the most in five years, further fueling growth woes amid U.S.-driven external uncertainties.

Seasonal adjusted industrial output decreased 2.7 percent in January from the previous month, according to economic activities data Statistics Korea released Tuesday. The decrease marked a downturn from December's 1.7 percent gain and the biggest monthly drop since February 2020, when the Covid-19 outbreak drove down production by 2.9 percent. The monthly decline was largely driven by contraction in manufacturing and construction.

Production at factories, mines and utilities slipped 2.3 percent from the previous month, weighed down by contraction in display panels and machinery. On a yearly basis, it declined by 4.1 percent.

While production of semiconductors strongly advanced by 20.8 percent on year, cars declined 14.4 percent, and metals 11.4 percent.

Construction output fell 4.3 percent, the steepest drop since May last year.

The service sector also inched down by 0.8 percent, with a 4 percent decline in retail and wholesale production and a 3.8 percent decrease in logistics offsetting the IT industry’s 4.7 percent growth.

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By destination, exports in the manufacturing sector fell 1.2 percent, and inbound shipments plunged 11.8 percent, resulting in a 7.4 percent decline in overall shipments.

Retail sales, a barometer for private consumption, retreated 0.6 percent from the previous month. Spending on durable goods such as smartphones rose 1.1 percent, yet semidurables, such as clothes and shoes, fell 2.6 percent.

On a yearly basis, retail sales remained unchanged from the same period of last year as the decline in durable and semidurable consumption was offset by increased spending on nondurable goods such as food.

As Korea grappled with weak domestic demand throughout 2024, retail sales posted their biggest yearly drop in 21 years in 2024, down 2.1 percent from a year prior.

Facility investments also fell by 14.2 percent on month and 3.1 percent on year.

The month marked the first time since November of last year that all economic indexes on production, consumption and investments logged a monthly decline.

“A base effect from the previous month and fewer business days drove downturns,” said Lee Doo-won, deputy director-general for short-term economic statistics at Statistics Korea during a press briefing on Tuesday.

“While semiconductor production has driven industrial output in January, a contraction in economic sentiment weighed down by internal and external uncertainties led to slower recovery in domestic demand, such as consumption and construction investments,” said Lee.

“The government will further accelerate its support for domestic demand recovery and exports amid the rising downside risks,” said the Ministry of Economy and Finance in a release Tuesday.

BY SHIN HA-NEE [[email protected]]