South Korea August economic activity: South Korea’s August industrial output fell sharply as autos and technology weakened, while retail sales declined again

Overview

This macro data update assesses South Korea’s August activity indicators. Goldman Sachs finds a broad near-term deterioration led by autos and technology in manufacturing, with weak retail demand and falling equipment investment offset only partly by a rebound in services and construction.

Core views

Headline industrial production fell 4.8% month on month in August on a seasonally adjusted basis, reversing two consecutive monthly gains and coming in far weaker than both Bloomberg consensus of +0.3% and Goldman Sachs’ already below-consensus forecast of -0.5%. The report identifies autos as the principal driver: auto production declined 24.8% month on month, affected by summer holidays and strikes, and accounted for roughly 60% of the sequential industrial-production contraction. Rubber and plastic production fell 11.0%, while technology-product output collectively declined 3.1%. Within technology, semiconductor output fell 2.2% month on month and electronic-components output fell 2.3%, following gains in June and July; handset production declined more sharply. Manufacturing conditions also softened in inventory and utilization data. The inventory-to-shipment ratio rose for a second consecutive month, from 96.7 to 100.9, its highest reading since May. Although the ratio eased slightly in technology, broader increases in sectors including autos and metal products more than offset that move. The manufacturing capacity-utilization index dropped from 105.2 to 99.6, its lowest level since May, while technology-sector utilization fell as semiconductor utilization reached its lowest level since October 2025. Domestic-demand indicators were also weak. Services output rebounded 0.5% month on month after a 1.4% fall in July, supported by ICT services, up 4.7%, and professional and scientific services, up 2.3%. However, wholesale and retail services fell 0.7%, and retail sales declined a further 1.8% after a 2.6% drop in the prior month. Durable-goods consumption fell 4.5% following an 8.6% decline in July, while non-durable-goods consumption decreased 1.6%. Investment signals were mixed. Equipment investment fell 9.5% month on month after two months of robust gains, mainly because of a sharp pullback in transport-equipment investment. Construction activity rebounded 1.9% after declining 1.0% in July, led by civil engineering. Orders provided a more positive but volatile counterpoint: domestic equipment orders rebounded 33.8% and construction orders rose 19.1%. On an unadjusted year-on-year basis, industrial-production growth dropped to -2.2% from +4.0% in July. Autos and petrochemical-related products, including rubber, fertilizer and plastic, accounted for the full headline decline, while external demand contributed 75% of the year-on-year contraction. Overall output fell 1.3% month on month after being almost flat in July, marking its sharpest sequential decline since last October. The cyclical component of the Composite Leading Index also edged down by 0.1 percentage point after nine months of continued gains.

Analysis framework

Goldman Sachs evaluates the August activity release by comparing seasonally adjusted month-on-month outcomes with consensus, its own forecast and prior-month readings. It then decomposes industrial production by sector, reviews inventories and capacity utilization, and assesses services, consumption, investment, orders and year-on-year external-demand contributions to establish the breadth and drivers of the slowdown.

Methodology notes

• Industry AnalysisVolume-price decomposition

  Sector contribution analysis of industrial production and demand indicators

  The report breaks the aggregate industrial-production decline into autos, technology products and other manufacturing sectors, and distinguishes domestic and external-demand contributions to explain the headline result.

• Cycle and Business ConditionsBusiness-Cycle Inflection Analysis

  Use of inventory-to-shipment, capacity utilization and the Composite Leading Index as cyclical indicators

  The report uses rising inventories, falling utilization and a slight decline in the leading-index cyclical component to assess whether momentum in activity has weakened.

Key data

• Industrial production-4.8% month on month, seasonally adjustedAugust result; Bloomberg consensus was +0.3%, Goldman Sachs forecast was -0.5%, and July was +0.5%.
• Auto production-24.8% month on month, seasonally adjustedAccounted for roughly 60% of the headline 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, 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 was weighed down by transport equipment.
• Industrial production growth-2.2% year on yearUnadjusted reading, down from +4.0% in July; external demand accounted for 75% of the decline.

Impact & implications

The report indicates that August’s activity weakness was not confined to a single headline measure: autos and technology drove a sharp manufacturing pullback, while retail demand and equipment investment weakened. Services and construction improved, and order indicators strengthened, but these offsets did not prevent the sharpest month-on-month fall in overall output since last October.