Industrial production in South Korea experienced a downturn in September, adversely impacted by the manufacturing, construction, and services sectors. The nation’s industrial output fell by 0.3% month on month, which marked a significant difference from the 1.3% increase recorded in August. When viewed year on year, the decline was noted at 1.1%.
Moreover, the monthly results were considerably lower than the market consensus, which had anticipated a growth of 1.2%. On a month-to-month basis, various sectors such as mining, manufacturing, along with electricity and gas, saw a decline of 0.2%, while construction dropped 0.1% and the service industry fell by 0.7%.
The only sector exhibiting recovery was public administration, which jumped by 2.6% compared to the previous month. Min-Joo Kang, a senior economist at ING specializing in South Korea and Japan, highlighted that the construction sector has been a significant drag on the country’s economy, having seen a decline in seven out of nine months this year, culminating in its fifth consecutive monthly drop in September.
Kang remarked, 'Unsold units remained at a high level, primarily outside the Seoul metropolitan area, indicating a lengthy recovery period ahead.' Additionally, he noted, 'Construction orders have been bottoming out since the year began, but there is a persistent lag in completion, so construction will continue to be a major hindrance to economic recovery for the foreseeable future.' Despite the disappointing industrial production data, Kang emphasized that the Bank of Korea is not expected to ease its monetary policy in the immediate future, suggesting a potential rate cut might not occur until April of the following year rather than in the first quarter of 2025.
Furthermore, given the current economic slowdown, South Korea's gross domestic product predictions have been adjusted, now expected to be downgraded to 2.2% for the current year and 1.5% for 2025..