Industrial production in South Korea saw a decrease in September, primarily driven by challenges faced in the manufacturing, construction, and services sectors. The country's industrial output reduced by 0.3% month-on-month, significantly contrasting with the 1.3% rise observed in August, and registered a 1.1% reduction year-on-year.
These monthly figures diverged sharply from market expectations, which had forecasted a 1.2% increase. On a monthly basis, the decline was noted across several sectors: the mining, manufacturing, and electricity and gas sectors fell by 0.2%, construction dipped by 0.1%, and the service industry experienced a downturn of 0.7%.
Notably, the only sector showing signs of recovery was public administration, which surged by 2.6% compared to the previous month. Min-Joo Kang, a senior economist for South Korea and Japan at ING, expressed concern over the construction sector's impact on the nation's economy, highlighting that it has experienced declines in seven of the first nine months of this year, marking its fifth consecutive drop in September.
"Unsold units remained at a high level, primarily in areas outside the Seoul metropolitan area, which indicates a prolonged recovery period," Kang noted. "Construction orders have been bottoming out since the beginning of the year, but there is a lag in completion, meaning construction will continue to pose challenges for the economy in the foreseeable future." Despite the underwhelming economic indicators, the Bank of Korea is expected to maintain its current monetary policy stance for the time being.
Kang mentioned that the next anticipated rate cut is likely to occur in April instead of the initially expected timeline of the first quarter of 2025. Additionally, projections regarding South Korea’s gross domestic product have been adjusted, with expectations now indicating a downgrade to 2.2% for the current year and a further decrease to 1.5% in 2025, reflecting the ongoing slowdown of the country’s economic growth..