In June, South Korea's construction sector experienced a notable slowdown, while the service trades struggled to gain traction. However, the nation’s manufacturing sector continued to exhibit strength, as indicated by a report released by Statistics Korea. The overall industrial production in South Korea reported a minor decline of 0.1% from May, yet it still reflected a year-on-year rise of 0.5%.
The manufacturing sector, which excludes construction and utilities, demonstrated robust performance during June, with an increase of 0.6% compared to the previous month and a significant year-on-year growth of 3.9%. Furthermore, South Korea's manufacturing shipment index saw an encouraging rise of 2.6% month-on-month, although it reported a decline of 3% compared to the same period last year.
On the inventory side, the manufacturing inventory index for June fell by 2.8% from May and saw a year-on-year decrease of 5.2%, indicating a more efficient management of resources within the sector. The overall manufacturing capacity also revealed positive trends, increasing by 0.6% in June relative to a year earlier, but remaining stable when compared with May.
The average capacity utilization rate for manufacturers reached 73.9%, marking a 0.9% improvement from the prior month. Despite the positive statistics in manufacturing, investments by South Korean enterprises in equipment rose by 4.3% in June from May, but exhibited a decline of 2.7% compared to June of the previous year.
Conversely, the construction trades faced challenges, with the value of construction completed in the country—adjusted for inflation—decreasing by 0.3% in June from May and witnessing a substantial year-on-year fall of 4.6%. Nevertheless, the value of construction orders received at current prices witnessed a remarkable increase, up by 25.9% compared to June of the previous year.
The service sector continued to exhibit sluggishness, with the South Korea services index rising by only 0.2% from May and a marginal 0.5% increase on a year-over-year basis. Additionally, the composite coincident index of business indicators experienced a slight uptick of 0.1% from May, while the composite leading index reported a growth of 0.3% from the previous month.
In analyzing the current economic landscape, ING Think, part of the Dutch investment house, highlighted that South Korea's economy depicts a mixed picture in the short term. They noted that while strong manufacturing growth and a recovery in equipment spending were anticipated due to the strength in the semiconductor sector, the sluggishness in service consumption and construction poses significant concerns for the country’s near-term growth trajectory..