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(2nd LD) Consumption, investment both fall in March amid recovery concerns

Economy 10:15 April 29, 2022

(ATTN: UPDATES with more details throughout)
By Kim Soo-yeon

SEOUL, April 29 (Yonhap) -- South Korea's industrial output rebounded in March after two straight months of decline, but consumption and facility investment lost ground in the latest sign that economic recovery momentum remains fragile, data showed Friday.

Industrial production increased 1.5 percent in March from the previous month, compared with a 0.3 percent on-month drop in February, according to the data from Statistics Korea.

Compared with a year earlier, industrial output rose 3.1 percent.

This file photo, taken April 21, 2022, shows stacks of containers at a port in South Korea's southeastern city of Busan. (Yonhap)

Retail sales, a gauge of private spending, declined in March amid the fast spread of the omicron variant. Retail sales fell 0.5 percent on-month, after remaining flat in February.

Facility investment declined for the second straight month mainly because China's COVID-19 lockdowns of its major cities dented supplies of parts for machinery and autos. Facility investment decreased 2.9 percent in March, compared with a 5.6 percent decline in February.

The statistics agency said industrial output turned to growth last month as service output and exports remained robust.

"But domestic demand-related data were sluggish in the indication that economic recovery momentum remains fragile," Eo Woon-sun, a senior Statistics Korea official, told reporters.

Asia's fourth-largest economy has been on a recovery track on the back of robust exports and improving private spending. But it faces heightened economic uncertainty as soaring energy prices have put upward pressure on inflation amid Russia's war with Ukraine.

In terms of an economic outlook for April, Eo cited robust exports and the lifting of almost all COVID-19 social distancing rules as positive factors.

"But amid global supply chain disruptions, the Ukraine crisis and China's COVID-19 lockdown of its major cities could weigh on the economy. Uncertainty for growth momentum still remains high," he added.

The main index gauging the current economic situations fell for the first time in six months in March in a possible sign that economic growth momentum may have peaked.

The so-called cyclical component of the composite coincident index, which reflects current economic situations, fell 0.2 point on-month to 102.4.

The cyclical component of the composite leading index, which predicts the turning point in business cycles, also shed 0.3 point on-month to 99.5, extending its losing streak to the ninth month.

"The fall in the composite coincident index indicates that uncertainty of an economic recovery remains high," Finance Minister Hong Nam-ki wrote on his Facebook page.

South Korea's consumer prices are under upward pressure amid surging fuel prices and a rebound in demand from the pandemic. High inflation could erode consumption, thereby hampering economic growth.

Consumer inflation grew 4.1 percent in March from a year earlier, accelerating from a 3.7 percent on-year gain in February. Inflation growth exceeded 4 percent for the first time in more than 10 years. The Bank of Korea aims to keep annual inflation at 2 percent over the medium term.

The International Monetary Fund recently lowered its 2022 growth outlook for the South Korean economy to 2.5 percent, while raising its inflation projection to 4 percent.

This file photo, taken April 20, 2022, shows the shopping district of Myeongdong bustling with citizens as South Korea lifted almost all COVID-19 social distancing rules. (Yonhap)


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