South Korea's President Moon Jae-in, front, is seen with European Commission President Jean-Claude Juncker at the EU-Korea summit in Brussels last October. Photo: AFP

Data released on Tuesday shows that South Korea’s industrial output, consumption and investment all rose in March, but experts say it is too early to pop the champagne corks on expectations of an economic upturn.

Tuesday’s improvement is being largely attributed to a base effect from the previous month, while the release of new cars and smartphones also affected the data for March.

With South Korea being a manufacturing economy, monthly industrial indexes are considered the most significant economic indicators, along with GDP.

In a surprise result, GDP fell in the first quarter of this year. The Coincident Composite Index and the Leading Composite Index, which show current and future economic trends, have also been declining for 10 consecutive months.

“The improvement in the index in March was largely caused by a large minus in February,” an official at the Ministry of Strategy and Finance told Asia Times. “We need to keep a close eye on whether the trend of improvement will continue in April.”

There are hopes that the economy will bottom out in the second quarter, but Lee Sang-jae, an economist at Eugene Investment and Securities, was less sanguine.

“The rebound in March data is almost meaningless, as one-off factors like a technical rebound affected the data too much,” he said. “The Coincident Composite Index and the Leading Composite Index also signal an economic downturn. When these indexes stop declining, we can start to talk about bottoming out.”

By the numbers

The National Statistical Office said on Tuesday that the country’s industrial output, both manufacturing and services, returned to a 1.1% on-month gain in March, after a 2.6% decline in February. However, on a year-to-year basis, it was a 0.7% drop compared to March 2018.

Production in mining and manufacturing rose 1.4% on-month; production of semiconductors rose 3.3%; and production of chemicals rose 3.3%.

The average manufacturing capacity utilization rate, currently sluggish, rose 1.0% from the previous month, but still remained low at 71.5%. Facility investment rose 10.0%, turning to an increase from a 10.2% drop in February. Investment in transportation equipment increased 26.2% due to one-off factors such as the purchase of aircraft. Investment in machinery also increased 3.8%. Imports of aircraft jumped to $26.3 million in March from $8 million in February.

Service sector output rose 0.2% on-month.

On-month, retail sales rose 3.3%, turning to an increase from a 0.5% fall in February. Sales of air purifiers increased due to the fine dust problem, while sales of durable goods jumped 7.7% due to the launch of new passenger cars and electronic devices. Sales at duty-free shops contributed to the trend, due to an increase in foreign tourists.

On-year, retail sales rose 2.4%, but considering the effects of the new product launches it’s too early to see whether the recovery is sustainable.

Construction investment increased 8.9% over the previous month although that was largely due to an increase in the government’s fiscal spending.

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