Industrial production in July showed zero growth... Consumption decreased and facility investment increased for two consecutive months.

In July, industrial production combined with declining consumer spending and equipment investment, marked a significant decline for the seventh month in a row. Retail sales and service sector production, key indicators of domestic consumption, both fell. Intense heatwaves and high material prices caused a decrease in dining out and travel, leading to the largest single-month drop in retail sales since June 2019.

With fewer consumers visiting restaurants and hotels, the service sector's production fell by 1.3% year-over-year. The drop in financial and insurance sector trading revenues, attributed to reduced trading volumes, was the primary cause. The national data shows that retail sales (-2.4%) and service production (-1.3%) both decreased simultaneously.

June's 2.7% increase in retail sales was erased in a single month. Automotive and household appliance sales (-7.7%) plummeted due to a decrease in demand for durable goods following the end of individual consumption tax exemption in June. For instance, automotive retail sales fell by 11.1%. Since February 2022, service production has fallen by 4.5 months, the largest decrease since then.

Trading revenues in the financial and insurance sectors fell by 4.8% due to lower trading volume, the most significant factor in the overall decline of 1.3%. The slowdown in the lodging and restaurant sectors (-1.0% and -1.2%, respectively) was also notable. In terms of equipment investment, it increased consecutively for two months, with a 7.5% rise in July compared to 6.9% in June.

This increase was driven by transport equipment (+15.4%) and machinery for semiconductor manufacturing (+4.2%). While construction output (inventories) fell by 1.1% compared to the previous month, the composite leading index, which reflects current economic conditions, rose by 0.8 points, and the forward-looking leading index rose by 0.4 points.