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Worst industrial production since last year’s pandemic… Economic recovery slows

[세종=이데일리 공지유 기자] Industrial production fell to its highest level in a year and a half since last year’s pandemic. All major indicators such as production and investment fell due to prolonged disruptions in the global supply chain, and retail sales growth also slowed. Although the quarantine guidelines for With Corona have been relaxed, concerns are growing that the economic recovery may be weakened as concerns about the spread of mutated viruses such as Omicron have grown.

Citizens are moving near Jamsil Saenae Station in Songpa-gu, Seoul on the evening of the 1st, the first day of phase 1 recovery (with Corona). (Photo = Yonhap News)

According to the industrial activity trend announced by the National Statistical Office, industrial production in October decreased by 1.9% compared to the previous month. It is the largest decline in 18 months since April last year (-2.0%). The face-to-face service sector is on the rise due to the government’s easing of social distancing, but the mining industry has decreased by a whopping 3.0% due to supply chain disruptions.

(Source: Statistics Korea)

In the mining industry, production decreased in automobiles (-5.1%) and primary metals (-5.9%). It was the biggest decline in 17 months after a 7.7% decline in May last year. This is because of the disruption in the supply and demand of semiconductors for automobiles, which resulted in the suspension of operations by major companies. Semiconductor shipments are declining and inventories are increasing. Manufacturing inventories rose 3.5% MoM, the fourth consecutive month of increase. The manufacturing average utilization rate also fell for the second straight month, falling to 71.1%.

Production in the service industry increased by 4.5% in the face-to-face service industry, such as accommodation and restaurants. However, the overall service industry production decreased by 0.3%, as it decreased in finance/insurance (-2.1%) and professional/science/technology (-2.5%). Retail sales rose 0.2% from the previous month. It has been increasing for two consecutive months, but the rate of increase has slowed.

Both the coincident composite index and the leading index, which indicate the economic trend, have also declined for the second month in a row. The coincident composite index cyclical fluctuation fell 0.2 points from the previous month and was negative for two consecutive months. The cyclical change in the leading composite index also fell 0.5 points from the previous month, the fourth consecutive month of decline. Eo Woon-seon, director of economic trend statistics at Statistics Korea, said, “There are strong exports and improvement in consumer sentiment, but there are also downside factors such as uncertainty about the re-spread of COVID-19, disruptions in global supply chains, and rise in international raw material prices.”

However, the consensus is that it remains to be seen whether the economic recovery trend will be broken. Kim So-young, a professor of economics at Seoul National University, said, “Uncertainty increases with Omicron and acts as a downside to the economy, but the transition to Corona is an upside factor.

Accordingly, the government decided to take the policy reins for the economic rebound. Hong Nam-ki, Deputy Prime Minister of Economy and Minister of Strategy and Finance, said in a Facebook post on the same day, “We will do our best to respond to the last-minute response in domestic demand, investment, and fiscal execution during the remaining period to recover the growth potential proposed this year.”

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