Korea's industrial output posts biggest gain in 6 years on autos, chips

South Korea's industrial output expanded at the fastest pace in six years in June, as a sharp rebound in automobile production rippled through consumption and investment while semiconductor output returned to growth, according to the Ministry of Data and Statistics on Friday. Production, retail sales and facility investment all increased from May, marking the first simultaneous rise in the economy's three key indicators since March. The seasonally adjusted all-industry production index rose 2.3 percent to 120.1, according to the ministry. The increase, which followed two consecutive monthly declines, was the largest since June 2020. Automobiles led the rebound, with production surging 15.4 percent as parts supplies normalized following a fire at an engine-parts supplier in March. Stronger domestic and overseas demand for hybrid passenger cars and sport utility vehicles also contributed to the increase. The recovery extended beyond factories. Passenger car sales jumped 21.8 percent, the sharpest gain since March 2020, as improved supply coincided with a rush of demand before a temporary cut in the individual consumption tax expired at the end of June. Auto-related investment also increased, helping facility investment rise 5.8 percent from May. "Parts supplies that had been disrupted by the fire in March normalized, while domestic and overseas demand increased, leading to a sharp rise in automobile production," a Data Ministry official said. Semiconductor production gained 4.5 percent, reversing a 10 percent decline in May. The ministry attributed the recovery to stronger demand across memory and nonmemory chips, including DRAM and flash memory. The gains in autos and chips lifted mining and manufacturing production by 6.4 percent, also the strongest increase in six years. Output of electronic components, telecommunications equipment and computers declined. Retail sales rose 2.7 percent, led by a 12.6 percent increase in durable goods. It was the largest rise in durable goods sales since September 2009. Discounts and promotional programs by major electronics makers also supported sales of home appliances, computers and telecommunications devices. Facility investment increased as spending on machinery, including semiconductor equipment, rose 6.9 percent and investment in transportation equipment gained 3.4 percent. Services output advanced 0.7 percent, while completed construction work rose 4.1 percent on increased housing and semiconductor-plant construction. The coincident composite index, which reflects current economic conditions, rose 0.5 point. The leading composite index gained 0.9 point, its biggest increase since April 2009. The monthly gain, however, did little to reverse the broader weakness in construction, with activity falling 5.3 percent in the first half compared to a year earlier. "Exports continued to grow in July, while consumer and business sentiment improved, offering positive signs for the economy," a Ministry of Finance and Economy official said, while cautioning that renewed military clashes between the United States and Iran had heightened tensions in the Middle East and added to external uncertainty.