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IP Falters, Weaker Manufacturing Activity May Drive Downward Q1 GDP Revisions

SOUTH KOREA
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Earlier data showed March industrial production well below expectations. We fell -3.2% m/m, against a +0.5% forecast. Feb was revised down to a 2.9% gain from 3.1% initially reported. In y/y terms, IP growth was 0.7% (+4.6% forecast). This puts IP momentum back to Q3 2023 levels.

  • In m/m terms it was the largest drop since end 2022. The Stats agency noted growth was coming off a high base.
  • Still, the result places downside risks to the bumper Q1 GDP result (initially reported as a 1.3% q/q rise). Overall manufacturing activity fell in quarter, but the GDP report suggested it rose 1.2%.
  • In terms of the detail chip production eased in the month, but there remains a large wedge between production in this sector versus the rest of production sub components.
  • Other data released shows retail spending rose 1.6%, but construction investment was down 8.7%m/m.
  • The cyclical leading index fell to -0.2 in March from 0.2 prior. It suggests some loss of economic momentum towards the end of Q1. The chart below overlays this index against y/y IP growth.

Fig 1: South Korea Cyclical Leading Index Versus Y/Y IP

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Earlier data showed March industrial production well below expectations. We fell -3.2% m/m, against a +0.5% forecast. Feb was revised down to a 2.9% gain from 3.1% initially reported. In y/y terms, IP growth was 0.7% (+4.6% forecast). This puts IP momentum back to Q3 2023 levels.

  • In m/m terms it was the largest drop since end 2022. The Stats agency noted growth was coming off a high base.
  • Still, the result places downside risks to the bumper Q1 GDP result (initially reported as a 1.3% q/q rise). Overall manufacturing activity fell in quarter, but the GDP report suggested it rose 1.2%.
  • In terms of the detail chip production eased in the month, but there remains a large wedge between production in this sector versus the rest of production sub components.
  • Other data released shows retail spending rose 1.6%, but construction investment was down 8.7%m/m.
  • The cyclical leading index fell to -0.2 in March from 0.2 prior. It suggests some loss of economic momentum towards the end of Q1. The chart below overlays this index against y/y IP growth.

Fig 1: South Korea Cyclical Leading Index Versus Y/Y IP

Keep reading...Show less