S. Korea's industrial output, facility investment drop in May; retail sales remain flat

South Korea's industrial production and facility investment fell for the second straight month in May.

The government believes the figures will pick up once the supplementary budget takes effect on the local economy in the second half of the year.

Moon Ji-young explains.

Industrial output and facility investment here both declined in May from the previous month, while retail sales remained flat.

According to Statistics Korea on Monday, industrial production declined by 1-point-1 percent on-month in May, continuing its downward trend for a second month.

This was largely driven by contraction in the mining and manufacturing sectors, which are the backbone of the economy.

"Mining and manufacturing production fell 2.9 percent month-on-month, with gains in primary metals and petroleum refining offset by drops in pharmaceuticals and metal processing."

May's facility investment dropped by more than 4 percent from the previous month, marking three months of decline.

Retail sales, a gauge of private spending, remained unchanged from a month earlier.

In April, all three major economic indicators -industrial output, retail sales, and investment -had recorded declines,

showing the fragility of the country's recent economic momentum.

Against this backdrop, the National Assembly passed a first supplementary budget bill in early May.

"We anticipate the effects of the supplementary budget to be felt in the economy in the latter half of this year, following a time lag."

He also explained that the direct impact of U.S. tariff policies on this overall production decline was not significant, and added that their effects might gradually appear after the July tariff negotiations.

Meanwhile, business sentiment among export companies is projected to continue to deteriorate for the third quarter.

This comes as the Korea International Trade Association announced on the same day that the third-quarter Export Business Survey Index was recorded below 100.

The association attributed this sustained sluggishness to ongoing trade uncertainties,

including U.S. tariff measures, coupled with slowing global growth and increased exchange rate volatility.

Moon Ji-young, Arirang News.