Retail sales edge up 0.1%, facility investment dips 0.1% — May industrial activity report

Government pledges 1 trillion won fiscal injection to keep second-half inflation below 3%

Lee Du-won, a senior statistics official at the Ministry of Statistics, presents the May 2026 industrial activity report at the Government Sejong Building in Sejong on Tuesday. [Yonhap]
Lee Du-won, a senior statistics official at the Ministry of Statistics, presents the May 2026 industrial activity report at the Government Sejong Building in Sejong on Tuesday. [Yonhap]

A 10 percent month-on-month drop in semiconductor production pushed overall industrial output into negative territory for the second consecutive month in May, while investment edged lower and consumer spending ticked up.

The all-industry production index (seasonally adjusted, excluding agriculture, forestry and fisheries) stood at 117.7 (base year 2020=100) in May, down 0.3 percent from the previous month, according to the May industrial activity report the Ministry of Statistics released Tuesday.

Overall industrial output had risen 2.1 percent in February and 0.4 percent in March before falling 0.4 percent in April. The back-to-back monthly declines are the first since July–August last year.

Mining and manufacturing output fell 3.0 percent from the previous month. Semiconductor production dropped 10.0 percent — the steepest decline since October last year, when it fell 23.8 percent.

The ministry said production of memory chips, including flash memory and DRAM, declined due to a base effect from the previous month and intra-quarter volume adjustments.

Pharmaceutical output also fell 17.5 percent. The ministry attributed the drop to a base effect from the prior month and production adjustments tied to certain delivery schedules.

Industries that posted month-on-month production gains included petroleum refining, up 9.8 percent — its largest increase since September 2023, when it rose 13.6 percent — and automobiles, up 2.7 percent. Petroleum refining output was still 14.7 percent below year-earlier levels, however, suggesting the monthly rebound largely reflected a base effect from April's sharp decline, which was driven by the fallout from the Middle East war.

The retail sales index, a gauge of goods consumption, rose 0.1 percent from the previous month. Sales of durable goods, including passenger cars, fell 3.4 percent, but gains in non-durable goods such as vehicle fuel, up 0.9 percent, and semi-durable goods such as clothing, up 2.3 percent, more than offset the decline.

Passenger car sales fell 10.9 percent, the sharpest drop since January 2024, when they declined 14.6 percent, marking a second consecutive monthly decrease. The ministry said ongoing production disruptions caused by a fire at a parts supplier, combined with consumers holding off on purchases ahead of new model launches in the second half of the year, weighed on sales.

Vehicle fuel sales, by contrast, rose 4.6 percent — the largest gain since March 2024, when they climbed 5.8 percent. The ministry said the increase reflected a base effect from April, when fuel sales fell sharply due to a government-imposed oil price cap linked to the Middle East war and an alternate-day vehicle use restriction.

Services output grew 1.3 percent. Output in information and communications fell 3.0 percent, but finance and insurance rose 5.9 percent on higher stock trading volumes, and professional, scientific and technology services surged 9.3 percent, driven by increased semiconductor research and development spending.

Wholesale and retail trade contracted 0.5 percent for a third consecutive monthly decline, while transportation and warehousing fell 1.8 percent for a second straight month. Rising international oil prices reduced demand for long-haul international flights, pushing air transport output down 13.4 percent for a second consecutive month.

Facility investment slipped 0.1 percent from the previous month. Investment in transportation equipment rose 0.2 percent, but spending on machinery, including precision instruments, fell 0.2 percent.

Construction work completed (in constant prices) rose 3.8 percent, with both building construction, up 5.1 percent, and civil engineering, up 0.2 percent, posting gains.

New construction orders (in current prices) jumped 55.3 percent from a year earlier, extending a run of year-on-year gains to seven consecutive months. The ministry attributed the surge to large-scale projects, including semiconductor factory construction in Yongin and Cheongju.

The cyclical variation index of the coincident composite index, which reflects current economic conditions, fell 0.3 point from the previous month, reversing a four-month rising trend.

The cyclical variation index of the leading composite index, which signals future economic conditions, rose 0.7 point.

The Ministry of Economy and Finance said it would do everything in its power to ease the burden on households as high prices, a weak won, elevated interest rates and slowing employment continue to weigh on livelihoods. The ministry said it would inject 1 trillion won ($648 million) in fiscal spending to keep the second-half inflation rate below 3 percent, and pledged to keep developing and implementing measures to restore youth employment, draw up a basic plan for employment stability during industrial transitions, and address job weakness in manufacturing and other underperforming sectors.


oskymoon@heraldcorp.com