Production, consumption, and investment all rose, but... "The Middle East shock has not been fully reflected"

In March, when the effects of high oil prices and supply chain disruptions from the Middle East war began to take hold, production, consumption, and investment all increased. It was the first 'triple increase' in six months, since September 2025. The economy was seen as holding up relatively well despite difficult conditions. The gains were attributed to several factors, including the stock market rally, the semiconductor boom, and a rise in foreign tourists. However, weaker consumption, production, and investment due to high oil prices and tighter raw material supplies are expected to show up in April industrial data.
On the 30th, the Ministry of Data and Statistics said in its March industrial activity report that all-industry production rose 0.3% from the previous month, as output increased in services (1.4%) and mining and manufacturing (0.3%).
All-industry production rose 1.2% in December last year, then fell 0.8% in January. After increasing 2.1% in February, it rose for a second straight month.
Within mining and manufacturing, production increased in automobiles (7.8%) and other transport equipment (12.3%). However, semiconductor production, which has been generating record profits, fell 8.1% from the previous month. The decline reflected a base effect after the sharp 28.2% increase in the previous month. Petroleum refining fell 6.3% because of disruptions in crude oil supply.
Service-sector production rose 1.4% from the previous month. Output increased in financial and insurance services (4.6%), boosted by the stock market rally, and in transportation and warehousing (3.9%), as the war pushed up shipping rates.
Retail sales, a domestic demand indicator, rose 1.8% from the previous month as sales increased in mobile devices, computers, home appliances, and other categories. Compared with a year earlier, retail sales were up 5.8%. The gains were attributed to the back-to-school season and higher spending by foreign tourists.
Investment also remained solid. Facility investment rose 1.5% from the previous month, as gains in transport equipment offset a decline in machinery investment. Compared with the same period last year, it increased 9.2%.
Construction conditions, however, continued to worsen. Construction completed, which measures domestic construction work by builders, fell 7.3% from the previous month. Work results declined in both civil engineering (-13.7%) and building construction (-4.5%). As raw material prices and labor costs rise further, the construction slowdown appears to be deepening.
Looking at the first quarter, production, consumption, and investment all increased, confirming a growth trend. On a quarterly basis, all six major indicators — all-industry production, mining and manufacturing, services, retail sales, facility investment, and construction completed — rose for the first time in 11 quarters, since the second quarter of 2023.
The Ministry of Economy and Finance said the March industrial indicators reflected the government's rapid response, which helped minimize the impact of the Middle East war.
Still, industrial indicators from April onward face significant uncertainty as the negative effects of the Middle East war begin to be fully reflected. Lee Doo-won, Director General for Economic Trend Statistics Review at the Ministry of Data and Statistics, said, "The impact of the Middle East war is expected to appear directly in April and May."
skjung@fnnews.com Jung Sang-gyun Reporter