S.Korea April factory output falls, retail sales drop most in 5 months

10:12 pm Tuesday, May 30th, 2023

SEOUL (Reuters) -South Korea’s factory production and retail sales fell in April, underscoring another tough quarter after the economy narrowly averted a recession in the first three months of the year.

Factory production in April fell 1.2% from March, on a seasonally adjusted basis, official data showed on Wednesday, slightly softer than a 1.6% loss tipped in a Reuters survey.

In March, output rose by 5.3% month-on-month, which was the fastest gain since June 2020, according to Statistics Korea.

Output in April was down 8.9% from the same month a year earlier, compared with a decline of 7.6% in March and a year-on-year drop of 7.9% expected by economists. It was the biggest annual loss in three months.

The all-industry output index, which includes the manufacturing as well as services sectors, fell 1.4% in April over a month, marking the first monthly decline since November and the biggest drop in 14 months.

On the consumption side, retail sales dropped 2.3% from a month earlier, after a 0.1% gain in the previous month, marking the first monthly fall since January and the biggest in five months.

“The latest data show that producers are on a roller coaster ride that will probably last for a few more months,” said economist Heron Lim at Moody’s Analytics.

“A recovery in industrial production is contingent on a stronger export market,” Lim said, adding that “easing inflation and the pause on monetary tightening will offer limited support to domestic demand.”

The finance ministry said data showed the economy went through a “moderate correction from the recovery in the first quarter”.

The ministry said both upside and downside factors are likely to affect the economic trend, such as spill-over effects from China’s reopening and high inventory levels in the semiconductor industry, respectively.

The weak economic activity in April follows the country’s slim growth in the first quarter of this year, which was just enough to prevent Asia’s fourth-largest economy from falling into a recession.

(Reporting by Jihoon Lee; Editing by Stephen Coates and Jacqueline Wong)