Automobile production fell at its steepest pace in six years and six months in August, as carmakers concentrated their summer shutdowns in that month. The slump in autos weighed on output, consumption and investment at the same time, sending South Korea's industrial activity into a "triple decline" for the first time in three months.
Total industrial output fell 1.3% from the previous month, according to the August Industrial Activity Trends report released by Statistics Korea on the 30th. It marked a second straight monthly decline after July's 0.1% drop. Output rose in services (0.5%) and construction (1.9%), but fell in mining and manufacturing (-4.8%) and public administration (-2.9%).
Autos drove the weakness in mining and manufacturing. Automobile production plunged 24.8% from the previous month, the largest drop since February 2020, when it fell 28.9%. The ministry said carmakers concentrated their summer holidays in August rather than spreading them across July and August as in most years, cutting the number of working days by about five from the previous month.
The drop in vehicle assembly reduced demand for tires and automotive plastics, pushing rubber and plastics output down 11.0%. Semiconductor production also fell 2.2%.
Retail sales, a gauge of goods consumption, declined 1.8%, a second consecutive monthly fall after July's 2.6% drop. Durable goods such as passenger cars fell 4.5%, while nondurable goods including food and beverages fell 1.6%. Passenger car sales dropped 13.6%, the sharpest decline in 31 months, since January 2024, when they fell 14.6%.
The ministry attributed the weakness to reduced supply from the concentration of auto industry holidays, buyers holding off ahead of new model launches, and a pull-forward effect from home appliance rebate events in June and July.
Facility investment fell 9.5% from the previous month. Investment in machinery, including semiconductor manufacturing equipment, rose 1.6%, but transportation equipment investment plunged 32.8% on a base effect from large-scale ship and aircraft imports the previous month. It was the first time since May, three months earlier, that output, consumption and investment all declined.
Construction completed, by contrast, rose 1.9% as work advanced on nonresidential projects such as semiconductor plants and residential projects including apartment complexes. The cyclical component of the coincident composite index, which indicates current economic conditions, rose 0.5 point from the previous month, while the cyclical component of the leading index, a gauge of future conditions, fell 0.1 point.
"The slump in autos affected output, consumption and investment alike," said Lee Doo-won, director of economic trends statistics at Statistics Korea. "Because there were temporary factors such as fewer working days from the concentration of holidays, we need to watch upcoming indicators more closely to assess the direction of the economy."
