South Korea Stronger than expected Rebound in June IP

Economics Research 31 July 2026 | 9:20AM KST

South Korea: Stronger-than-expected Rebound in June IP

Bottom line: Irene Choi | Goldman Sachs (Asia) L.L.C., Seoul Headline IP rose 6.4% mom sa in June, rebounding after two months of contraction. Branch

The figure was stronger than our forecast and consensus expectations. Production Goohoon Kwon, CFA | rose broadly across major sectors, with strong gains in autos (15.4%) and Goldman Sachs (Asia) L.L.C. semiconductors (4.5%) accounting for roughly 40% of the headline sequential increase. Services output rose 0.7% mom sa, and retails sales increased by 2.7%, with the latter recording the strongest momentum since January. Indicators of investment recovered. Overall output rebounded by 2.3%, recovering after two months of contraction and reaching its strongest momentum since June 2020.

5 out of 5 for relevance to growth

+3 on a scale of -5 to +5 for surprise relative to consensus

IP growth for June: +6.4% month-on-month, seasonally and work-day adjusted by the source; Bloomberg consensus: +2.9%; GS forecast: +3.2%; Previous: -2.9%.

Services output for June: +0.7% month-on-month (seasonally adjusted); Previous: +1.0%.

1. Headline IP rose 6.4% mom sa in June (seasonally adjusted by the source), rebounding after two months of contraction (Exhibit 1). The figure was stronger than our forecast and Bloomberg consensus expectations. 2. Production of autos and semiconductors gained 15.4% and 4.5% mom sa respectively, and together accounted for roughly 40% of the headline sequential increase. Production increased broadly across major sectors including in medical, precision and optical instruments (+9.2%), electric equipment (+16.0%) and machinery (+8.6%), which together accounted for roughly 25% of the headline sequential increase. Production in refineries and the chemical industry also recovered. 3. The manufacturing inventory-to-shipment (I-S) ratio dropped to 94.2 from 102.4 the prior month (seasonally adjusted by the source), reversing most of the increases in prior two months (Exhibit 2). The I-S ratio fell broadly across sectors, particularly in tech (including semiconductors), autos, petroleum refining and

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tobacco. 4. The manufacturing capacity utilization index rose to 105.3 from 99.7 the prior month (seasonally adjusted by the source), reaching its highest level since July 2022. The capacity utilization index for the tech sector fell for the 4th consecutive month, as a modest rebound in semiconductors was offset by sharp declines in electronic components, computers and handsets. The weakness in the tech sector was more than offset by a recovery in capacity utilization across non-tech sectors. Refined petroleum products gained for the second consecutive month, but remained below the level seen in March. 5. Services output rose 0.7% mom sa, rising further after a rebound of +1.0% the prior month. Gains continued to be led by financial services (+2.8%) along with transportation and storage (+2.0%) services. Retail sales increased by 2.7%, recording the strongest momentum since January. A contraction in semi-durable goods consumption (-1.7%) and flat non-durable goods consumption (+0.2%) were offset by a sharp rebound in durable goods consumption (+12.6%). 6. Indicators of investment recovered. Equipment investment accelerated to 5.8% mom sa, driven by broad gains across machinery (+6.9%) and transport equipment (+3.4%). Construction also gained 4.1%, with the pace of increase staying stable from last month, as the contraction in civil engineering (-1.3%) was offset by increases in residential and non-residential building construction (+5.9%). Momentum for volatile orders was mixed, as domestic orders for equipment gained a further 12.9%, but construction orders dropped sharply by 59.0% after five months of increases. 7. On a year-on-year basis, IP growth rose to +5.8% (without workday or seasonal adjustment) from -1.1% last month (Exhibit 3). The contribution from external demand accounted for 60-70%…