South Korea August economic activity: South Korea’s August activity weakened sharply as autos and technology dragged industrial production lower

Overview

Goldman Sachs’ August activity update finds a broad short-term weakening in South Korea’s economy. Industrial production fell sharply on auto and technology weakness, consumption remained soft, and manufacturing indicators deteriorated, although services and construction showed limited offsets.

Core views

Headline industrial production fell 4.8% month on month on a seasonally adjusted basis in August, reversing two consecutive monthly increases. The outcome was substantially weaker than Bloomberg consensus for a 0.3% gain and Goldman Sachs’ own below-consensus forecast of a 0.5% decline; July industrial production had risen 0.5%. The report attributes roughly 60% of the sequential contraction to a sharp 24.8% month-on-month decline in auto production, affected by summer holidays and strikes. Technology-related manufacturing also weakened. Total tech-product production declined 3.1%, including a 2.2% drop in semiconductor output and a 2.3% fall in electronic components, while handset production declined more sharply. Rubber and plastic production fell 11.0%. On a year-on-year basis, industrial-production growth shifted to -2.2% from 4.0% in July. Goldman Sachs states that autos and petrochemical products—rubber, fertilizer and plastic—accounted for the entire headline decline, and that external demand contributed 75% of the year-on-year contraction. Manufacturing operating indicators reinforced the weaker production reading. The inventory-to-shipment ratio increased for a second consecutive month to 100.9 from 96.7, its highest level since May. Although the ratio declined slightly for technology, including semiconductors, broad increases across other sectors such as autos and metal products more than offset that movement. The capacity-utilization index fell to 99.6 from 105.2, its lowest level since May. Technology-sector utilization declined as semiconductor utilization fell to its lowest level since October 2025. Services output provided a partial offset, rising 0.5% month on month after a 1.4% contraction in July. Gains in ICT services of 4.7% and professional and scientific services of 2.3% outweighed a 0.7% decline in wholesale and retail services. However, household consumption indicators remained weak: retail sales fell 1.8% after a 2.6% drop in the prior month. Durable-goods consumption declined 4.5% following an 8.6% fall in July, while non-durable consumption fell 1.6%. Investment signals were mixed. Equipment investment declined 9.5% after two months of robust gains, mainly because of a sharp pullback in transport-equipment investment. In contrast, construction rose 1.9% after falling 1.0% in July, led by civil engineering. More volatile order indicators improved: domestic equipment orders rebounded 33.8% and construction orders increased 19.1%. Overall output fell 1.3% month on month after being almost flat in July, marking its sharpest sequential contraction since last October. The cyclical component of the Composite Leading Index also declined by 0.1 percentage point after nine months of continued gains, adding to the report’s evidence of weaker near-term momentum.

Analysis framework

The report assesses August activity by comparing seasonally adjusted monthly production, services, consumption, investment, inventory and capacity-use data with prior-month results and market expectations. It then identifies sector contributors—especially autos, technology and petrochemicals—and supplements the monthly analysis with year-on-year production and external-demand contributions.

Methodology notes

• Industry AnalysisSupply-demand framework

  Manufacturing inventory-to-shipment and capacity-utilization indicators

  The report uses rising inventories relative to shipments and falling utilization to assess softer manufacturing demand and operating conditions alongside the production decline.

• Industry AnalysisVolume-price decomposition

  Sector contribution analysis of production changes

  Goldman Sachs decomposes the industrial-production decline by sector, showing the contribution from autos, technology products and petrochemicals rather than relying only on the aggregate result.

Key data

• Industrial production-4.8% month-on-month, seasonally adjustedVersus Bloomberg consensus of +0.3%, Goldman Sachs forecast of -0.5%, and prior-month growth of +0.5%.
• Auto production-24.8% month-on-month, seasonally adjustedAccounted for roughly 60% of the headline sequential industrial-production contraction.
• Semiconductor production-2.2% month-on-month, seasonally adjustedFollowed gains in June and July.
• Manufacturing inventory-to-shipment ratio100.9Rose from 96.7 in July and reached its highest level since May.
• Manufacturing capacity utilization index99.6Fell from 105.2 in July and reached its lowest level since May.
• Retail sales-1.8% month-on-monthExtended the prior month’s 2.6% decline.
• Equipment investment-9.5% month-on-month, seasonally adjustedFollowed two months of robust gains and reflected weaker transport-equipment investment.
• Overall output-1.3% month-on-month, seasonally adjustedThe sharpest sequential contraction since last October.

Impact & implications

The report portrays August as a material setback for South Korean activity: auto and technology manufacturing weakened, consumption remained under pressure, and manufacturing inventories rose as utilization declined. Services, construction and order data offered partial offsets, but did not prevent the sharpest sequential fall in overall output since last October.