South Korea’s industrial production, consumption and investment all fell in April as rising 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 output in April fell 3.3% seasonally adjusted from the previous month, falling for the first time in seven months and marking its biggest decline since May 2020. But production in the service sector rose by 1.4%.
Investment in facilities fell 7.5% last month, more than a 2.2% drop in March. Investments in facilities also fell for the third month in a row as companies delayed investments due to growing supply chain risks and rising material prices.
Retail sales fell 0.2% last month, after falling 0.7% in March.
The data points to slowing growth momentum even though South Korea’s economy has recovered quickly from the pandemic. Officials said the export-driven economy faced growing uncertainty, citing growing inflationary pressure from war in Ukraine and supply chain disruptions triggered by China’s pandemic shutdowns.
Goldman Sachs economists said the contraction in industrial production was much stronger than expected and wider across most sectors, despite the improvement in the services sector.
“Divergence could be maintained in the second quarter, given the slowdown in China and the 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% in the fifth hike since last summer and lowered its growth forecast for this year to 2, 7% against 3% in February.
South Korea’s government on Monday approved a record 62 billion won ($49.3 billion) supplementary budget to support small businesses affected by the pandemic.