Korean retail sales decline for 6 consecutive quarters, China’s October indicator shows ‘economic contraction’
In the third quarter, retail sales decreased by -2.5%, facility investment -3.3%, and the cyclical value of the Donghaeng Composite Index, which shows the economic situation, fell 0.1 point in September, falling for four consecutive months, indicating a high interest rate and high inflation system.
The October Purchasing Managers Index (PMI) announced by China on the 31st fell from 50.2 to 49.5. The non-manufacturing PMI also fell from 51.7 in September to 50.6, falling below 50p, the economic contraction line.
Statistics Korea's September industrial indicators show a decline in automobiles and an increase in semiconductors, with manufacturing production increasing in machinery equipment (5.1%) and petroleum refining (14.6%), automobiles (-7.5%), pharmaceuticals (-13.1%), and primary metals (-13.1%). -4.8%) decreased.
The government diagnosed semiconductor production as an ‘economic recovery’, predicting that semiconductor production rose for two consecutive months in August (13.5%) and September (12.9%) and will also rise by double digits in October.
On the other hand, retail sales (consumption) increased in the first quarter of this year (1.1%) compared to the previous quarter, but then decreased for two consecutive quarters, and decreased for six consecutive quarters compared to the same period last year, the longest decline since statistics were compiled.
The 2.5% decline in retail sales in the third quarter was the largest decline since the first quarter of 2020 (-5.5%).
The decline in facility investment in the first quarter of this year (-8.8%) compared to the previous quarter changed from a weak increase in the second quarter (1.3%) to a decline again to -3.3% in the third quarter, which appears to be reflected in the prolonged high interest rates and high inflation system.
Retail sales decreased for two consecutive months in July (-3.2%) and August (-0.3%), then increased by 0.2% in September, but food and beverage sales increased intensively due to the Chuseok holiday.
Retail sales, which is the consumption trend in September, increased slightly by 0.2% due to an increase in sales of food, beverages, cosmetics, etc., due to an increase in durable goods such as communication devices and computers (-2.3%), an increase in semi-durable goods such as clothing (-2.8%), and an increase in non-durable goods such as food and beverages (2.3%). see. September's service industry production increased by 0.4% from the previous month, increasing for the fourth consecutive month, but increased in wholesale and retail (1.7%), transportation and warehouses (2.2%), lodging and restaurants (2.4%), and arts, sports and leisure (-4.2%). It decreased in telecommunications (-0.7%), associations, repairs, and individuals (-1.9%). Manufacturing inventory increased in September in electronic components (17.5%) and oil refining (8.3%), and semiconductors (-6.7%) and mechanical equipment (-6.7%). -9.0%) decreased by 2.2% from the previous month. The inventory/shipment ratio (inventory ratio) of the manufacturing industry was 113.9%, down 10.4% points from the previous month.
The inventory rate is the lowest in three months since last June (112.3%), and the inventory rate is falling due to a concentrated increase in semiconductor exports. China's National Bureau of Statistics' official Purchasing Managers' Index (PMI) in October fell from 50.2 to 49.5. Reuters reported on the 31st that it fell below 50p, which distinguishes between economic contraction and expansion, and fell below the forecast of 50.2.
China's non-manufacturing PMI also fell to 50.6 from 51.7 in September, confirming a slowdown in activity in the broader service sector and construction industry.
“Given that PMI is a month-on-month indicator, the decline in October reflects an adjustment in supply, not a change in demand,” said Dan Wang, chief economist at Hang Seng Bank of China. “September production was due to improved domestic demand.” "This was noticeably better than the previous month, which put pressure on industrial prices. In October, we saw more efforts by the industrial sector to reduce supply to deal with margin pressures," he told Reuters. “The weak PMI data may partly reflect weakening demand related to the housing slowdown and slowing infrastructure spending,” said Xu Tianchen, senior researcher at the EI Unit. “There are signs that exports are bottoming out, but external “A strong recovery in demand will be difficult,” he told Reuters.
“The eighth consecutive month of declines in both new export and import orders suggests manufacturers are struggling to attract overseas buyers and are ordering fewer parts used in finished products for re-export,” Reuters said.
China's central bank, which has maintained lower interest rates than Korea, strengthened short-term policy lending in early October by expanding bank credit and expanding the low interest rate maintenance system, injecting the largest amount of cash support since the end of 2020.
“An additional 1 trillion yuan in November and December would be helpful,” Xu, senior researcher at the Economist Intelligence Unit, told Reuters of the additional infusion.
Samsung Electronics' semiconductor (DS) division continued to show strong losses with both DRAM and NAND recording losses of KRW 4.58 trillion in the first quarter and KRW 4.36 trillion in the second quarter, with an operating loss of KRW 3.75 trillion in the third quarter.
Regarding Samsung Electronics, Reuters said, “Reflecting the improvement in demand, the prices of some memory chips rebounded at the end of the third quarter, and in September, thanks to the increase in semiconductor production, overall domestic factory production increased for two consecutive months, and a gradual recovery in demand in 2024. “Samsung Electronics’ performance is an extension of the trend toward developing its own chips among major companies such as smartphone rival Apple,” he said on the 31st.
Lee Seung-han, head of the economic analysis department of the Ministry of Strategy and Finance, said in a briefing on the 31st, "Semiconductor shipments increased by 65.7%, the largest since statistics were compiled in 1980 when industrial activity trends were compiled," and added, "Production and shipments were strong. This is due to the good semiconductor exports in September, but tomorrow “Even considering that it is the beginning of the fourth quarter, the announced October exports are expected to be quite good numbers. Overall exports are also likely to turn positive,” he said.