"The construction cold snap" is prolonging. The construction performance, as indicated by construction completion, has recorded a "minus" for seven consecutive months, marking the "longest decline" since related statistics began in 1997. "Construction orders," also known as a leading indicator for future construction performance, are being supported by public orders. The government anticipates that construction investment will start showing positive results in the second half of next year.
According to the "November industrial activity trends" released by Statistics Korea on the 30th, construction completion, which indicates construction performance, decreased by 0.2% compared to the previous month. It has declined for seven months, including May (-4.6%), June (-1.5%), July (-0.3%), August (-2.2%), September (-2.0%), October (-4.1%), and November (-0.2%), marking the longest period of decline since statistics were compiled.
◇ Worst construction completion, construction orders flourish thanks to 'public'
A Ministry of Economy and Finance official noted, "There is a reduction due to the completion of the Samsung Electronics Pyeongtaek semiconductor plant, and some apartment completion works are not fully reflected yet," adding, "However, since the decrease is close to 0%, it's hard to pinpoint one particular issue."
However, the performance of construction orders was good. Last month's construction orders (current value) increased by 62.9% compared to the same month last year, with increases in both building and civil engineering. Since orders typically affect construction completion in four to six quarters, there is a positive signal for future construction investment performance.
It appears that the government played a significant role in this positive performance of construction orders. When examining construction orders by orderer, public orders increased by 207.6% compared to the previous year, while private orders increased by 17.1%. In contrast, private investment saw a 96.8% "decrease." The government is seen as supporting the sluggish private construction orders.
A Ministry of Economy and Finance official explained, "Besides large-scale private construction, when civil engineering works such as expressways or the Seoul Metropolitan Area Rapid Transit (GTX) are expedited faster than the existing plans, it positively impacts construction," adding, "We aim to enhance (the lacking parts in the private sector) as much as possible by advancing these works."
The discrepancy between construction performance and orders is affecting the economic trends as well. The coincident composite index cyclical component, which indicates the current economic situation, decreased by 0.5 points (p) from the previous month, influenced by construction completion. Conversely, the leading composite index cyclical component, which predicts future economic phases, increased by 0.1p, reflecting the positive trend in construction orders.
Given the improving construction orders, the government assessed that it is likely to start having a positive impact on "construction completion" in the second half of next year. A Ministry of Economy and Finance official said, "Construction orders have been improving since the second quarter of this year," and considering the four to six-quarter time lag that affects performance, they expressed hope that it might positively influence construction investment from the second half of next year onwards.
◇ Retail sales, which were relatively fine, face dark clouds due to impeachment and airline accident
The industrial activity trends last month showed not only construction investment but also unsatisfactory performance in production and facility investment indicators. Except for retail sales, which benefited from the shopping festival "Korea Sale Festa" (Kosepe) and mild weather, most indicators showing industrial activity were not favorable.
Especially for the production of the entire industry, including manufacturing, there were "extreme" results across different sectors. The semiconductor production index (seasonally adjusted index, 2020=100), one of the pillars supporting our country's industrial production, recorded 175.2, the highest ever.
On the other hand, another pillar, automobiles, decreased by 5.4% compared to the previous month, pulling down the overall index. The production decline was caused by disruptions in car exports due to heavy snowfall in the Gyeonggi region, compounded by strikes in the automobile-related industry, including Hyundai Transys. The consumption of passenger cars also decreased concurrently.
Retail sales, which had slightly improved by rebounding after three months, may worsen again this month. A Ministry of Economy and Finance official said, "December was quite tumultuous with issues like the impeachment situation and airline accident, so we need to take time to examine how they affect consumer sentiment," adding, "We are also reviewing similar past cases such as the Sewol ferry disaster and Itaewon tragedy as references."