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| Eoh Un-seon, a Statistics Korea official, gives a briefing on the country's industrial output trends in July at the government complex in Sejong, Tuesday. Yonhap |
Industrial output, retail sales decline amid Delta variant spread
By Yi Whan-woo
Repercussions from the continued spread of the Delta variant of the coronavirus have begun rippling across the Korean economy, with key economic indicators, such as industrial output and retail sales, turning downward.
This situation suggests that the country's economic recovery will be dampened by the Delta variant-driven, fourth wave of COVID-19 cases, and that its growth may fall short of reaching the previously forecast 4-percent mark.
According to data released by Statistics Korea, Tuesday, industrial output fell 0.5 percent in July from the previous month, while retail sales pulled back 0.6 percent during the same time period.
These drops amount to a setback from month-on-month gains in June, when industrial output rose by 1.6 percent and retail sales improved by 1.4 percent. The June data did not reflect the estimated effects from the spread of the Delta variant, which was at an early stage back then.
That data had been perceived as a strong sign of economic recovery, especially considering the fact that the figures were on the rebound from May, when industrial output dropped by 0.2 percent month-on-month and retail sales fell by 1.8 percent month-on-month.
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"The fact that the two economic indicators jointly went downhill again, as in May, suggests that the fourth wave of the coronavirus has begun to undermine the economic recovery," said Joo Won, deputy director of the Hyundai Research Institute.
He expected that the downward trend will continue at least until the end of the third quarter.
Operated under the wing of the Ministry of Economy and Finance, Statistics Korea noted manufacturing and service output gained ground and that the impact of the fourth wave of the pandemic has been "felt by a smaller margin" compared to previous waves.
"I take it as a subjective view of the government's side," Joo said.
The data released Tuesday also showed that the "Leading Index of Cyclical Change," an index widely used to estimate turning points in business cycles, ended its 14-month winning streak. It dipped by 0.2 points to 102.6 from June to July.
But the "Coincident Index of Cyclical Change," which reflects current economic situations, rose by 0.1 point month-on-month to 101.3.
Regarding other indicators that can possibly reflect the economic repercussions of the pandemic, Joo picked consumer sentiment.
According to data from the Bank of Korea (BOK), the composite consumer sentiment index (CCSI) marked the second consecutive monthly decline in August.
The CCSI came in at 102.5 for August, after marking 103.2 for July and 110.3 for June.
A reading above 100 means that optimists outnumber pessimists. This indication was cited as a reason by some analysts that the fourth wave of the pandemic will not seriously affect the consumer sentiment.
Speaking on condition of anonymity, an economist from a private think tank disagreed.
"You should pay attention to the downward trend of the CCSI, because it means the index may eventually fall below 100," he warned.
