Here's solid proof that Korea's consumption is finally recovering

Retail sales edged up 1.4%.

According to DBS, consumption is recovering as the interruption impact of April ferry disaster has started to fade. Based on the latest data, retail sales increased 1.4% MoM a in May, almost fully offsetting the -1.6% decline in April. Services output also rose 0.6% in May, a halfway recovery from the -1.2% in the previous month.

Here's more from DBS:

The improvement in May consumption data may not be only due to the holiday effects. Public sentiment has recovered from the ferry disaster. The consumer confidence index, which dropped 3ppt immediately after the disaster, has regained 2ppt this month according to the newly published survey. Meanwhile, the recreation-related services sector, which was hit the hardest by the ferry incident, has showed a notable recovery. Output in this segment jumped 6.9% in May, reversing half of the -11.6% decline in April.

News headlines however, focused on the weak industrial production data (-2.7% in May). The manufacturing indicators including industrial output, export shipments, capacity utilization and equipment investment deteriorated broadly and abruptly in May.

Much of this should be attributed to one-off factors, i.e., the reduced number of working days. According to the preliminary data, exports growth has bounced back to 5.9% YoY in the first 20 days in June, significantly up from -0.4% during the same period in May. The full-month trade data (due tomorrow) will likely confirm the recovery signs.

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