Despite the decrease in service industries, the production of all industries increased in June 2022, driven by mining & manufacturing industries. In terms of expenditure, equipment investment increased sharply in contrast to gains in the value of construction completed and retail sales.

Despite the disruptions in production in some industries resulting from the strike of unionized truckers, the production of mining & manufacturing industries posted the biggest gain in six months, backed by the remarkable performance of major industries. The production of semiconductors rebounded after three months of adjustments, and the production of general machinery and auto increased sharply boosted by the recovery of equipment investments and the easing of shortage in parts. The production of service industries was slightly adjusted due to the base effect of the production gaining by more than 1% for three straight months and the increase in rainy days limiting outdoor activities. Delays in the delivery of cars, inflation, and the stabilized pandemic situation diminished retail sales while equipment investment is on the recovery track, buoyed by the delivery of semiconductor equipment.

The performance of industrial activities in June confirmed the continued recovery of the Korean economy, but uncertainties in the economic flow persist due to overseas factors. Positive signs include the effect of the end of unionized truckers’ strike and the partial resolution of disruptions in supply chain, but a slowdown of growth in exports caused by the sluggish global economy and increases in the inventory of manufacturing industries may put a damp on the recovery. In case of consumptions and investments, the continued recovery of employment and the government’s tax-cuts and deregulation efforts are positive signs that exist alongside uncertainties such as inflation, continued interest rate hikes and the worsening sentiment of households and businesses.

‘Exports increased in the first half of 2022 despite the persistent shortage in parts supply’
→ Production and shipment in May 2022 increased by 15.9% and 12.4%, respectively, year-on-year, resulting from the base effect of the situation in the same period of 2021 when there were disruptions in production due to troubles in sourcing semiconductors. In June, continued difficulties in sourcing semiconductors used in cars diminished domestic consumption by 10.6% from the same period of the previous year. Exports in June turned downward to end the three-month streak, bogged down by the continued supply chain issues and logistics problems resulting from the strike of unionized truckers.

‘Alongside the continued improvements in production indices, exports decreased while imports increased’
→ Despite uncertainties in the shipping industry caused by inflation, rate hikes and the war in Ukraine, global orders dropped only by 24% year-on-year in May 2022, supported by the new orders of LNG carriers and container ships. In June, exports decreased by 36.0% from the same period of 2021 as fewer high value-added ships were delivered due to the effect of orders having plunged in 2020 after the outbreak of COVID-19. Backed by the dramatic increase of imports of bulk carriers and ship engines from China, imports in May increased by 8.5% year-on-year despite the reduced import of ship parts.

’Decline in production slowed, but exports turned sharply downward’
→ As the drop in domestic consumption slowed down and equipment investments turned upward, production in May decreased by 0.4% year-on-year but increased by 6.2% month-on-month, indicating a slowdown in decline. Despite the continued infrastructure investments of major countries, exports in June plunged by 11.7% from the same period of 2021 due to the worsened performance of exports to China and the fall in the number of working days. However, exports to India increased by 17.2% as the country carried out plans to develop and expand transportation infrastructure including railways, ports and roads.

’Production stalling due to declining domestic consumption and negative macroeconomic conditions’
→ In May, production increased slightly by 0.1% from the same period of the previous year, resulting from the poor performance of steel-consuming industries and the effect of equipment repair and maintenance. The continuation of high export unit prices pushed up exports in June by 5.4% year-on-year while imports skyrocketed by a whopping 51.2% from the same period of 2021, supported by the recovery of demand for sheets, further price-slashing of China and other exporters and base effects.

’ Petrochemical products worth USD 5.48 billion were exported in June to record best-ever results for the month of June’
→ High oil prices and unit prices driven up by higher refining margins helped sustain the two-digit growth rates of exports for fifteen straight months in June, which increased by 81.7% year-on-year despite the effect of routine maintenance. Whereas the growing exports of asphalt and transport oil such as lubricating oil, aviation fuel, and diesel pushed up the export volume by 13.0%, production in May decreased by 1.0% year-on-year as capacity utilization rate was reduced by routine maintenance.

‘Exports increased for five straight months, and exports in the first half of 2022 increased by 13.2% from the same period of 2021’
→ Due to the higher unit price of parts resulting from the growing demand for new products of Korean manufacturers and supply chain issues caused by the war in Ukraine and other factors, exports in June increased by 10.6% from the same period of the previous year, led by exports to China and Europe. Production and shipment in May decreased by 12.2% and 4.5%, respectively, from the same period of 2021, as the prolonged war in Ukraine and the signs of another spread of COVID-19 raise costs and as interest rate hikes slow the economy and weaken consumer sentiment.

’ Exports of semiconductors pick up, but outlook remains uncertain’
→ The production and shipment of semiconductors in May increased by 24.3% and 8.9%, respectively, from the same period of the previous year to support brisk sales, but a possible imbalance in supply and demand requires a close watch considering the recent gradual increase of inventories and especially the inventories of May, which surpassed 50%. Exports in June increased by 10.7% year-on-year to stand at USD 12.35 billion, recording the best-ever results for the month of June.

‘Exports cut by declining global demand resulting from economic slowdown’
→ As economic slowdown and increased logistics costs eat into the demand for IT products and raise concerns over a long-term production cut, production in May turned downwards in line with the declining LCD production and demand for smartphones. In June, the sluggish global economy turned exports downward by 5.9% to break the streak of 14 months.