Industrial production and investment surged in February, led by semiconductors, with overall economic indicators showing broad improvement. However, the impact of the Middle East conflict has yet to be reflected in the data, raising the possibility of shifts in the economic trajectory ahead.
According to the February Industrial Activity Trends report released by the National Data Office on the 31st, the seasonally adjusted all-industry production index stood at 118.4 (2020=100), up 2.5% from the previous month. This marked the largest monthly increase in five years and eight months, since June 2020.
Mining and manufacturing output rose 5.4%, with the production index (117.9) hitting an all-time high. The gains were driven by increases in semiconductor (28.2%) and non-metallic mineral (15.3%) production. Semiconductor output growth in particular was the highest in 38 years, since January 1988. The semiconductor production index also reached a record high of 215.4.
Investment expanded sharply as well. The facility investment index climbed 13.5% from the previous month, the largest increase in 11 years and three months, since November 2014. The rise was driven by increased investment in transportation equipment such as electric vehicles and machinery including electrical equipment and devices.
The construction sector also rebounded. Construction work done, which measures domestic construction performance, surged 19.5% from the previous month, the largest increase since the data series began in 1997. Construction orders, a forward-looking indicator, rose 6.7% year-on-year on gains in the housing and building segments, extending an upward trend for a fourth consecutive month.
Domestic demand indicators were also solid. Service-sector output rose 0.5% from the previous month, and the retail sales index remained flat at the previous month's level.
The cyclical component of the coincident composite index, which reflects current economic conditions, rose 0.8 points from the previous month, the largest increase since January 2011.
However, these indicators reflect conditions before the Middle East conflict. The government noted that while semiconductor-led exports have maintained a favorable trend, downside risks to the economy could grow due to rising international oil prices and weakening consumer and business sentiment.
"Some indicators may show signals from the Middle East situation in March, but we expect the full impact to materialize from April onward," said Lee Du-won, Director of Economic Trends Review at the National Data Office.
