South Korea’s industrial production, consumption and investment all fell in April as higher raw material prices and supply chain disruptions weighed on Asia’s fourth-largest economy, it said Tuesday.
It was the first time in two years that all three indicators fell in the same month.
Factory production in April shrank 3.3 percent seasonally from a month earlier, for the first time in seven months, marking the biggest drop since May 2020. But service sector production grew 1.4 percent.
Facility investment fell 7.5 percent last month, up from a 2.2 percent drop in March. Facility investment also fell for the third straight month as companies postponed investment due to increasing supply chain risks and rising material prices.
Retail sales fell 0.2 percent last month, after falling 0.7 percent in March.
The data points to slowing growth momentum, even as the South Korean economy has recovered quickly from the pandemic. Officials said the export-driven economy was facing increasing uncertainty, citing rising inflationary pressures from the war in Ukraine and supply chain disruptions due to China’s pandemic lockdowns.
Economists at Goldman Sachs said the contraction in industrial production was much sharper than expected and broader in most sectors, despite the improvement in the services sector.
“The divergence could be sustained through the second quarter given China’s slowdown and the shrinking impact of monetary tightening in Korea’s major trading partners,” they said in a report on Tuesday.
The Bank of Korea last week raised its benchmark interest rate by a quarter point to 1.75 percent in the fifth rise since last summer and lowered its growth forecast for this year to 2.7 percent from its forecast of 3 percent in February.
The South Korean government on Monday approved a record additional budget of Won62tn ($49.3 billion) to support small businesses hit by the pandemic.