In September 2024, South Korea’s production in all industries moderated (△0.3 percent) as the construction industry remained sluggish (△0.1 percent from the previous quarter), and the mining and manufacturing industry moderated after the big jump in the previous month (△0.2 percent).

In September, a decline in semiconductor and automotive parts production caused mining and manufacturing production to fall (from 4.4 to △0.2 percent), even as the production of major sectors such as automotive (finished vehicles), machinery, and chemical industries increased. The service industry slowed down (from 0.3 to △0.7 percent) after gaining for three months (from June to August 2024) as the easing of the infectious disease epidemic and the heat wave caused a decline in health and welfare, arts, sports, and leisure. Despite a sharp increase in durable goods (6.3 percent), retail sales fell (from 1.7 to △0.4 percent) due to a slowdown of non-durable goods (△2.5 percent) and semi-durable goods (△3.2 percent). Capital investment rebounded significantly, driven by a big jump in machinery (17.0 percent), including semiconductor equipment. The cyclical change in the coincident index declined due to a fall in construction completed and retail sales, while the cyclical change in the leading index—supported by strong domestic shipments of machinery—remained stable even as the term spread narrowed.

The South Korean economy needs to be closely monitored by sector, paying special attention to economic uncertainties. There are external uncertainties such as the US presidential election, the economy of major countries, the situation in the Middle East, and the performance of key industries, as well as difficulties for small businesses and risks to household debt and real estate PF.

‘Declined for Three Straight Months, Affected by Sluggish Production, Domestic Consumption and Exports’
→ Exports in August decreased by 4.1 percent year-on-year due to lower production volumes caused by wage and collective bargaining agreements and production equipment adjustments. Domestic consumption in July fell by 4.9 percent year-on-year, affected by weaker demands and supply volumes. Production saw a decrease in July due to slower domestic demand and exports and partial labor strikes at some auto makers. Imports spiked by 37.5 percent from a year ago in July, driven by strong imports of eco-friendly cars.

‘Significant Improvements in All Key Indices’
→ Key production indicators improved in July, with double-digit increases in production, shipments, and capacity utilization. August exports increased by 80.0 percent from a year ago, led by deliveries of large ships. Imports in July were up 25.3 percent year-on-year as more ships and marine engines were imported. While cumulative global ship orders from January to August increased by 30.3 percent year-on-year on a CGT basis, South Korean shipbuilders selectively received orders and saw their orders increase by 14.5 percent.

‘Turned Positive as Strong Domestic Demand Boosted Production’
→ In July, production increased by 5.7 percent year-on-year, driven by strong domestic consumption and exports enabled by gains in domestic shipments and capital investment. Due to slow exports to the United States, August exports fell by 5.9 percent from a year ago despite strong exports to China. Imports in July reversed to a 7.7 percent year-on-year increase as demands from downstream industries recovered.

‘Production Continued Declining, while Exports Shrunk Due to Falling Unit Prices’
→ July production declined by 4.8 percent year-on-year as sluggish construction, automotive and other industries weakened demands amidst growing exports of steel products. In August, falling export unite prices caused the industry’s exports to decline by 1.7 percent year-on-year even though export volume jumped by more than 10 percent. Imports decreased by 5.6 percent year-on-year in July as domestic demand for steel slowed and import unit prices increased.

‘Amidst Falling Exports and Unit Prices, the Industry Grew by 1.4 Percent Year-on-Year, Driven by Volume Expansion’
→ July production grew by 3.8 percent year-on-year, supported by higher utilization rates at domestic refineries and expanded export volumes. In August, exports increased for the sixth consecutive month, led by volume expansion.

‘August Exports up 50.4 percent Year-on-Year on Rising Global Smartphone Demand’
→ Exports increased by more than 50 percent for the second consecutive month, following a 53.4 percent increase in July, as major domestic and foreign smartphone makers, with plans to launch new products in Q3, increased supply of parts to be used in overseas production bases. In July, production surged by 63.8 percent year-on-year, and shipments jumped by 24.4 percent, while inventories increased by as much as 68.2 percent. Imports of smartphone parts fell by 21.9 percent year-on-year in July, with overall imports down by 4.7 percent from a year ago.

‘Exports Exceeded USD 11 Billion for Four Straight Months’
→ August exports grew by 38.8 percent year-on-year to reach USD 11.878 billion, which is the largest August exports on record. July's semiconductor production index continued to show strong growth, rising by 22.2 percent year-on-year to 152.4. However, the month-on-month rate turned into an 8.0 percent decline after growing for three straight months since April.

‘August Exports Turned Negative Due to Base Effect and Aggravated Global Competition’
→July production rose by 0.8 percent year-on-year, and the capacity utilization index grew by 4.6 percent year-on-year as the effects of new product launches continued, but the growth slowed. Despite the prolonged effect of new product launches, August exports declined by 4.9 percent year-on-year, affected by strong performance in the same month last year and market share gains by competitors.