In March 2023, production of all industries increased in Korea, driven by increases in mining and manufacturing and service industries. Consumption is strong, but investment has slowed slightly. Investments in both equipment and construction saw a decline.
In March 2023, production in mining and manufacturing industries rose by 5.1 percent month-on-month, driven by 35.1 percent and 6.5 percent increases in semiconductors and automobiles, respectively, despite a 31.5 percent decline in the production of communications and broadcasting equipment. Service industry production inched upward by 0.2 percent month-on-month as real estate and financial insurance increased by 3.1 percent and 1.8 percent, respectively. Retail sales increased by 0.4 percent from the previous month as sales of durable and nondurable goods improved by 0.4 percent and 0.7 percent, respectively, despite a 1.1 percent decline in sales of semi-durable goods. Equipment investment fell by 2.2 percent month-on-month as investment in machinery such as special industrial machinery increased by 0.5 percent, but investment in transportation equipment such as ships declined by 9.7 percent. Construction investment declined by 3.3 percent from the previous months as engineering projects gained by 12.2 percent supported by increased execution of SOC budgets, but construction projects fell by 7.6 percent due to delays in material supply. The cyclical change in the coincident index increased by 0.6 percentage points, while the cyclical change in the leading index decreased by 0.3 percentage points affected by growing inventories and falling domestic shipments of machinery. As the real economy continues to deteriorate since the second half of 2022, there are a mix of upside and downside risks to the economy going forward. On the production side, there are positive factors, such as expectations over the effect of China’s reopening and gradual improvements in service sector production. At the same time, burdens exist including a possible weakening of the global recovery, slow exports of the nation’s key items such as semiconductors, and a slowdown in IT. In the case of consumption and investment, there are positive factors such as the implementation of the amendment to the Act on Restriction of Special Taxation, measures to boost domestic consumption, slowing inflation, and improving consumer and business sentiment. However, there are risk factors such as short-term investment adjustments caused by semiconductor production cuts, uncertainties in the construction industry, and household
※ Source: Ministry of Economy and Finance (moef.go.kr)(moef.go.kr)
‘'Finished car exports surpassed USD 6 billion to achieve best-ever monthly results'’
→ February production increased year-on-year but decreased month-on-month due to disruptions in parts supply and the previous year’s base effect. However, domestic consumption in March grew by 20.6 percent year-on-year driven by the base effect of last year’s parts supply issues and pent-up standby demand. March exports grew by 39.6 percent year-on-year to record a double-digit growth for two consecutive months due to an increase in eco-friendly vehicle exports and a base effect of the previous year. Exports of finished cars grew by 64.2 percent, with exports to the US and EU increasing in double digits alongside strong exports of EVs, which increased by 95.7 percent.
‘'Production indicators continued recovery with both production and orders growing'’
→ Whereas economic recession stalled global ship orders, Korea's strength in eco-friendly ships helped it win large orders for LNG carriers and CMA CGM from H-Line Shipping and methanol-fueled carriers from HMM, resulting in a 62.6 percent year-on-year increase of orders in February to CGT 1.68 million. February imports were up by 22.2 from the previous year as improvements in production indicators boosted equipment imports and ship blocks were imported from China in massive volume. In March, exports saw a 24.3 percent year-on-year decrease despite the delivery of high-end LNG-FSUs to Russia, as deliveries centered on small and medium-sized vessels.
‘'China's delayed recovery aggravated sluggish exports to China’’
→ Production in February increased slightly by 8.6 percent year-on-year thanks to the rebound in both domestic consumption and exports. Production grew both year-on-year and month-on-month as exports and domestic sales increased by 12.8 percent and 7.0 percent, respectively. Imports increased by 3.1 percent from a year ago to USD 2.417 billion in February. Exports declined slightly by 0.8 percent year-on-year in March affected by slow exports to China and the base effect of strong performance in the same period of the previous year.
‘'Exports continued to fall due to production rebounds and weak global steel prices'’
→ Steel production saw a decline of 2.1 percent year-on-year in February affected by fewer working days and weak exports. Despite the increase in volume, imports in February fell by 0.4 percent from a year ago due to the base effect of high import unit prices in the same period of the previous year. Exports in March dropped by 10.7 percent from a year ago caused by falling exports to major export destinations such as the US, EU, and ASEAN and the base effect of high export unit prices in the previous year.
‘'Exports turned to a decline for the first time in 25 months due to falling unit prices'’ → In February, slow domestic consumption continued and production fell by 0.5 percent year-on-year. Exports in March plunged by 16.6 percent from a year ago to USD 4.6 billion. Despite growing export volumes led by aviation fuel and higher refining margins, exports decreased year-on-year as a result of a relative drop in export unit prices caused by the base effect of international oil prices. While export volumes increased by 3.4 percent from a year ago, export unit prices grew by 19.4 percent.
Wireless communication devices ‘'Recovery of the global smartphone market stalled, March exports plummeted by 42.3 percent’’ → In February, production surged by 43.9 percent from a year ago, with shipments up by 20.6 percent and capacity utilization rate up by 32.3 percent. Imports saw a year-on-year decrease of 4 percent in February, led by mobile phones. After falling for eleven straight months in 2022, exports reversed course and recorded a 17.7 percent growth in January 2023 only to decline again. Exports to China plunged by 43.2 percent year-on-year while exports to the US nosedived by 40.8 percent, and exports to the ASEAN region also fell by 17.2 percent.
Semiconductors ‘'Signs of the easing of sluggishness in the semiconductor industry'’ → In February, semiconductor production and shipments dropped by 41.8 percent and 41.6 percent year-on-year, respectively. The month-on-month production also plunged by 17.1 percent while the year-on-year inventory growth rate widened significantly to 33.5 percent as demands for semiconductors continued to fall. In March, exports decreased by 34.5 percent year-on-year to reach USD 8.598 billion and decline for the eighth consecutive month after ending a long-term rally.
Display ‘'Exports plunged as recession curbed demands'’ → Production fell in February due to sluggish sales of major products made with display panels such as smartphones and TVs. In March this year, exports plunged by 41.6 percent to fall for ten months in a row as sales of products made with display panels declined due to the global economic slowdown.div>
* Please note that the latest data available in Statistics Korea are for the previous month in the case of exports and the month prior to the previous one for production.
※ Source: Korea Institute for Industrial Economics and Trade (kiet.re.kr)(kiet.re.kr)
*This article is extracted from Invest KOREA information center, 2023.