Industrial production slides 1.1% on weak manufacturing, construction

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Industrial production slides 1.1% on weak manufacturing, construction

Published: 30 Jun. 2025, 16:37 Updated: 30 Jun. 2025, 16:51

Audio report: written by reporters, read by AI

Export-ready cars are parked at a port in Pyeongtaek, Gyeonggi, on June 30. [YONHAP]

Korea’s industrial production declined last month as new U.S. tariffs and prolonged weakness in major sectors pushed both output and investment sharply lower. Consumer spending remained stagnant as well, raising concerns over the economy’s near-term momentum.

The overall industrial production index dropped by 1.1 percent month-on-month in May to 112.5, with 2020 as a base of 100, according to Statistics Korea's May Industrial Activity Trends report released Monday. It marked the largest monthly decline since January and the second consecutive drop following a 0.8 percent fall in April.

The major drag came from manufacturing, which contracted by 3 percent, driven in large part by metal processing, which plunged 6.9 percent. The downturn reflects ongoing difficulties in downstream sectors like automobiles and construction.

Automobile production fell 2.3 percent in May, extending its decline for a second month, partly due to operations at overseas plants.

“Since May, a 25 percent tariff has been imposed on auto parts, which led to a drop in exports and domestic production,” said Choi Chang-yoon, director of service industry trends at Statistics Korea.

The service sector also contracted 0.1 percent, led by declines in information and communications, which shrank 3.6 percent, and transportation and warehousing, which fell 2.4 percent.

Retail sales remained flat in May as gains in durable goods, which saw a 1.2 percent increase, and semidurable goods, which rose 0.7 percent, were offset by a 0.7 percent decline in nondurable goods, including cosmetics. This marked the third straight month of lackluster performance following declines in March, when the index fell 1 percent, and April, when it fell 0.9 percent.

Export-ready cars are parked at a port in Pyeongtaek, Gyeonggi, on June 30. [YONHAP]

Despite the implementation of the first supplementary budget, which focused on disaster recovery and trade responses, the government acknowledged that it had limited impact on boosting consumption.

“We expect the second supplementary budget, which includes livelihood support coupons, to help improve consumer sentiment,” a Ministry of Economy and Finance official said.

Facility investment plunged 4.7 percent in May, marking the third consecutive monthly decline — the longest streak in nearly two years. Investment in machinery, including semiconductor manufacturing equipment, dropped 6.9 percent.

Construction completion was down 3.9 percent, with both building and civil engineering activities falling 4.6 percent and 2 percent, respectively. Construction orders, a leading indicator of future activity, declined 5.5 percent on year, largely due to a 62.4 percent drop in orders for infrastructure projects such as power and telecommunications.

The coincident composite index, which reflects current economic conditions, fell 0.4 points due to weak construction activity and domestic shipments. The leading composite index, a gauge of future economic trends, also dipped by 0.1 points.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY JANG WON-SEOK [[email protected]]