Last month, production and consumption showed a slight slowdown, following the base effect of recording a 'triple increase' in June when production, consumption, and investment all rose. In contrast, investment recorded its highest growth rate in five months. The government assessed that while monthly fluctuations in retail sales are significant, the trend of consumption recovery continues.
According to the 'July 2026 Industrial Activity Trends' released by the Ministry of Economy and Finance on the 31st, total industrial production in July remained flat compared to the previous month (hereafter same basis). While decreases were recorded in the service and construction sectors, increases occurred in public administration and manufacturing. Compared to the same period last year, it rose by 3.1%.
Retail sales fell by 2.4%, while equipment investment increased by 7.5%. After recording a 'triple increase' in June when production, consumption, and investment all grew, both production and consumption showed weakness excluding investment.
Manufacturing production declined in automobiles (-4.5%) but rose in electronic components (20.7%), primary metals (4.2%), and semiconductors (0.5%), resulting in a 0.2% overall increase. The rise in electronic components was influenced by increased production of OLEDs (organic light-emitting diodes) and printed circuit boards ahead of the launch of new smartphones.
Service sector production increased in information and communications (3.5%) but declined in finance and insurance (-4.8%), professional/scientific/technical services (-2.7%), leading to a 1.3% overall decrease. The decline was driven by reduced stock trading volume and transaction amounts in July, which negatively impacted the finance and insurance sector.
Retail sales, representing goods consumption, saw declines across durable goods such as passenger cars (-7.7%), semi-durable goods like clothing (-1.4%), and non-durable goods including cosmetics (-0.1%), resulting in an overall 2.4% decrease.
This was partly due to the base effect of a significant increase in durable goods sales in June, following the resolution of supply disruptions caused by a fire at an auto parts factory in March. The Ministry also noted that the end of the individual consumption tax reduction for automobiles and large-scale home appliance discount events in June contributed significantly to adjustments in durable goods sales. Consumption is divided into goods consumption and service consumption; however, industrial activity trends only cover goods consumption.
Equipment investment rose by 7.5%, driven by increases in transportation equipment (15.4%), centered on other transport equipment such as ships and aircraft, and machinery including semiconductor manufacturing equipment (4.2%). This marks the second consecutive month of growth, recording the highest increase rate in five months since February (15.0%).
Lee Du-won, an official at the Ministry's Economic Trends Statistics Review Committee, stated, "Transportation equipment increased due to a rise in semiconductor manufacturing equipment over the past two to three months, and July saw similar growth as memory semiconductor production capacity expanded." He added, "Investment in ships increased due to improved profitability from rising freight rates amid the Middle East conflict, and facility investments by airlines announced earlier this year also rose."
Construction orders decreased by 1.1%, with civil engineering projects increasing (18.5%) while building construction declined (-7.4%). This marks a shift from a two-month upward trend to a decline.
The coincident composite index, which reflects current economic conditions, rose by 0.8 points to 101.2. The leading composite index, used to forecast future economic trends, increased by 0.4 points to 104.2.
The Ministry of Economy and Finance stated, "July's industrial activity maintained a favorable production and investment trend despite the high base from last month's significant increase." It further noted, "Considering the considerable monthly volatility, when June and July are viewed together compared to April and May, growth (1.5%) is observed, and momentum for consumption recovery remains intact, as evidenced by the expanded growth rate of August credit card sales."
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