Production, Consumption and Investment All Fall Together for First Time in Three Months

Production, consumption and investment—the three pillars of the economy—all fell together for the first time in three months. According to the August Industrial Activity Trends released by the National Data Agency on the 30th, the overall industrial production index for August (a composite indicator of broad economic activity, spanning factory output to consumption and investment) stood at 118.7, down 1.3% from the previous month, marking a second consecutive monthly decline after July (-0.1%). It was the first 'triple decline' since May. Lee Doo-won, director-general for economic trends statistics at the National Data Agency, said, "In August, weak automobile output affected both production and consumption."

Behind the drop in production was the mining and manufacturing sector. Mining and manufacturing output fell 4.8% from the previous month. While machinery and equipment rose (3.1%), automobiles (-24.8%) and rubber and plastics (-11.0%) dragged down the overall figure. Output of automotive new parts and RV passenger cars declined, along with production of plastic products for transport equipment and tires and tubes. The drop in automobile production was the steepest since February 2020 (-28.9%).

The vacation season and strikes were contributing factors. Production was disrupted by fewer working days during the August holiday period and strikes at some companies. "This year's summer vacations were concentrated in August, cutting working days by roughly five days," Lee explained.

The automobile slump also spilled over into consumption. Retail sales fell 1.8% from the previous month. While semi-durables such as clothing rose (0.4%), durables such as passenger cars (-4.5%) and non-durables such as food and beverages (-1.6%) dragged down sales. Passenger car consumption (-13.6%) in particular posted its steepest drop since January 2024 (-14.6%).

Facilities investment fell 9.5% from the previous month as machinery such as semiconductor manufacturing equipment rose (1.6%) but transport equipment including ships and aircraft plunged (-32.8%). It was the first decline after two straight months of increases in June and July.

Services output rose 0.5%, helped by growth in information and communications (4.7) despite weakness in wholesale and retail (-0.7%), while construction completed rose 1.9% as growth in building construction (4.5%) offset a decline in civil engineering (-3.9%). Business indicators were mixed. The cyclical component of the composite coincident index, which reflects current economic conditions, rose 0.5 percentage points from the previous month, but the cyclical component of the leading index, which signals the outlook, fell 0.1 percentage points.