Invest KOREA

South Korea’s industrial activities performed well in July 2024: services production and capital expenditure rose for the second month in a row, with a particularly strong jump in capital expenditure that has been delayed in the first half of the year.

Despite the launch of IT new products, production in the mining and manufacturing industry fell in July 2024, mainly due to temporary factors such as the performance of the semiconductor industry at the beginning of the quarter and disruptions in automobile production (i.e., strikes and early vacations), (from 0.7 percent in June 2024 to △3.6 percent in July 2024). The service industry increased for the second consecutive month (from 0.3 percent in June 2024 to 0.7 percent in July 2024), driven by broadcasting sales (boosted by the Olympic Games), an increase in the information and communication sector driven by more users switching carriers (after purchasing new IT products), and an increase in water and land transportation. Retail sales shrunk as goods consumption slowed (from 1.0 percent in June 2024 to △1.9 percent in July 2024). Capital investment improved significantly (from 3.4 percent in June 2024 to 10.1 percent in July 2024), led by a strong gain in transportation equipment (50.5 percent). Construction completed declined (from △0.8 percent in June 2024 to △1.7 percent in July 2024), with a rise in construction projects (0.9 percent) offset by a decline in civil engineering projects (△8.9 percent). The cyclical change in the coincident index fell due to the decline in construction completed, while the cyclical change in the leading index stayed flat as the KOSPI rose despite the decline in the inventory cycle index.

The South Korean economy needs to be closely watched as there are potential upside and downside risks. On the production side, the improving IT industry and the prospect of a soft landing in the global economy are positive contributors. On the other hand, uncertainties in the supply chain, elections in major countries, and difficulties for small businesses are weighing on the economy. On the spending side, stable inflation, the arrival of fall festivals and seasonal sales, and the start of capital investment that was postponed in the first half of the year are upside factors, while household debt, real estate PF risks, and sluggish construction orders are downside factors.