Advertising
Advertising
twitter
youtube
facebook
instagram
linkedin
Advertising

Asia: Korean industrial production decreases by 1.8%

Asia: Korean industrial production decreases by 1.8%| FXMAG.COM
Aa
Share
facebook
twitter
linkedin

Table of contents

  1. Industrial production
    1. Industrial production, retail sales, and investment all slid in September
      1. All-industry has declined for three months in a row
        1. Manufacturing IP contracted 1.8% MoM in September
          1. Forward looking data is mixed, but biased towards the soft side
            1. Near-term consumption outlook is gloomy
              1. Retail sales excluding automobiles are weak

                After the 3Q GDP result last week, we expected IP to be somewhat weak in September. But the details were much weaker than anticipated with forward-looking components pointing to a cloudy outlook. While the recent crowd tragedy will temporarily negatively impact private consumption, the Bank of Korea is unlikely to take action as a result

                asia korean industrial production decreases by 1 8 grafika numer 1asia korean industrial production decreases by 1 8 grafika numer 1
                Source: Pexels
                -1.8%

                Industrial production

                % MoM sa

                Lower than expected

                Industrial production, retail sales, and investment all slid in September

                All-industry industrial production dropped 0.6% month-on-month (seasonally adjusted) in September, the third consecutive month of decline. Manufacturing activity also declined for a third straight month while services, a growth engine after reopening, turned weaker.

                All-industry has declined for three months in a row

                asia korean industrial production decreases by 1 8 grafika numer 2asia korean industrial production decreases by 1 8 grafika numer 2
                Source: CEIC

                Manufacturing IP contracted 1.8% MoM in September

                Manufacturing production was worse than in August (-1.4% revised) and below the market consensus (-0.8%). The weakness in September was mainly driven by semiconductors (-4.5%) and basic metals (-15.7%). One temporary factor exaggerating the weakness was the decision by POSCO to shut down some facilities due to a typhoon in September. The steel company expects a gradual recovery within a few months. However, continued weakness in semiconductor production and stockpiling mean that the future production outlook is worrying. Meanwhile, service output declined 0.3% in September (vs 1.8% in August) with retail/wholesale and health/social welfare down 2.1% and 1.0%, respectively.

                Forward looking data is mixed, but biased towards the soft side

                Machinery orders declined -16.5% MoM (sa) in September (vs 30.4% in August) with private orders down quite sharply while construction orders rebounded solidly by 20.4% in September (vs -24.9% in August) mainly led by non-residential segments such as factories, warehouses, and civil engineering.

                We expect residential construction to turn weak due to a sharp increase in unsold housing units and adjustments in housing prices. Although the outlook for facility investment is expected to be better than that of construction in the short-term, facility investment is expected to shrink next year due to the recent tightening in the credit market.

                Near-term consumption outlook is gloomy

                Retail sales dropped 1.8% MoM (sa) in September (vs 4.4% in August). Automobile sales rose sharply by 9.4%, recording three monthly increases as production lines normalise globally, but overall sales dropped with weak consumer and semi-durable goods sales. 

                The Halloween disaster is expected to have some negative impact on private consumption. Early November is the peak shopping season in Korea, and several shopping- and entertainment-related events had been scheduled. However, as the government has declared a one-week national mourning period through 5 November to honour the victims, all festivals and entertainment events have been cancelled or postponed. However, the magnitude of the negative impact on the economy is expected to be small compared to the sinking of the Sewol Ferry in 2014. Thus, we don’t expect any macro policy changes due to this accident.

                Retail sales excluding automobiles are weak

                asia korean industrial production decreases by 1 8 grafika numer 3asia korean industrial production decreases by 1 8 grafika numer 3
                Source: CEIC
                Read this article on THINK

                Tags
                South Korea Investments Industrial Production Consumption

                Disclaimer

                This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more


                ING Economics

                ING Economics

                INGs global economists and strategists tell you whats happening and is likely to happen in the world of global markets.

                Our analysis and forecasts will help you respond and stay a step ahead in the world of macroeconomics, central banks, FX, commodities and everything else in between. Visit ING.com.

                Follow ING Economics on social media:

                Twitter | LinkedIn


                Advertising
                Advertising