South Korea’s industrial production, consumption and investment fell in April as higher commodity prices and supply chain disruptions weighed on Asia’s fourth-largest economy, data showed on Tuesday.
It was the first time in two years that all three indicators fell in the same month.
Factory production in April fell a seasonally adjusted 3.3 percent from the previous month, falling for the first time in seven months and marking the biggest drop since May 2020. However, service sector output rose 1.4 percent.
Fixed asset investment fell 7.5 percent last month, more than a 2.2 percent drop in March. Fixed asset investment also fell for the third straight month as companies delayed investments due to growing supply chain risks and rising material prices.
Retail sales fell 0.2 percent last month after a 0.7 percent drop in March.
The data signals slowing growth momentum, although South Korea’s economy has recovered quickly from the pandemic. Officials said the export-led economy faced mounting uncertainty, citing rising inflationary pressures from the war in Ukraine and supply chain disruptions sparked by China’s pandemic lockdowns.
Goldman Sachs economists said the decline in industrial production was much stronger than expected and broader in most sectors, despite the improvement in the service sector.
“The divergence could be sustained amid China’s slowdown and the contractionary impact of monetary tightening on Korea’s major trading partners in the second quarter,” they said in a report Tuesday.
The Bank of Korea last week raised its benchmark interest rate by a quarter point to 1.75 percent, the fifth hike since last summer, and cut its growth forecast for this year to 2.7 percent from February’s 3 percent.
South Korea’s government on Monday approved a record 62 trillion won ($49.3 billion) supplementary budget to prop up small businesses hit by the pandemic.