South Korea's index of industrial production fell 2.0 percent on the month in July after falling 1.5 percent in June. This index has now fallen in three of the last four months, in line with the Bank of Korea's recent assessment that"the improvement in domestic economic growth has somewhat moderated". The index fell 8.0 percent on the year after dropping 5.9 percent previously.

Within the industrial sector, manufacturing output also contracted 2.0 percent on the month in July after falling 1.6 percent in June and fell 8.1 percent on the year after a previous decline of 6.2 percent. Previously published PMI survey data indicated that growth in the manufacturing sector contracted again in July, as it has done now for more than a year, with data for August due to be published later in the week.

Activity was mixed in other key sectors. Service sector output rose 0.4 percent on the month in July after increasing 0.5 percent in June, while construction sector activity rebounded with an 0.8 percent increase after falling 2.0 percent previously. Output in the public administration sector weakened sharply, down 6.5 percent on the month after increasing 3.0 percent previously. Aggregating across all industry, output fell 0.7 percent on the month after no change previously, and fell 1.4 percent on the year after increasing 0.7 percent previously.

The industrial production index measures changes in the volume of industrial production with respect to the base year. The index charts the growth in production of each major industry and of the manufacturing sector. Industrial Production measures the physical output of the nation's factories, mines, and utilities. Factories manufacture various products, and the industrial production indexes have been prepared as a comprehensive indicator of wide-ranging production activities for such products and are regarded as some of the most important among economic indexes.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that won't lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

Industrial production provides key industry data for export-dependent economies. It is highly sensitive to the business cycle and can often predict future changes in employment, earnings and income. For these reasons industrial production is considered a reliable leading indicator that conveys information about the overall health of the economy. This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Detailed data in the report shows which sectors of the economy are growing and which are not.