South Korea's index of industrial production fell 2.9 percent on the month in May after falling 0.6 percent in April, while year-over-year growth slowed sharply from 5.1 percent to 0.2 percent. These data are consistent with weakness in PMI survey and trade data for May and indicate that the recent escalation of global trade tensions is having a notable impact on conditions in South Korea's industrial sector.

Within the industrial sector, manufacturing output fell 3.0 percent on the month after a previous decline of 0.6 percent and rose 0.2 percent on the year after a previous increase of 7.2 percent. Previously published PMI survey data also showed a contraction in the manufacturing sector in May, with data for June due to be published later this week.

Activity was also weak in other sectors. Service sector output fell 0.1 percent on the month in May, as it did in April, while construction sector activity fell 3.9 percent after a previous decline of 1.4 percent. Output in the public administration sector was the exception, increasing 0.8 percent after a previous fall of 6.3 percent. Aggregating across all sectors, output fell 1.1 percent on the month, weakening from a previous decline of 0.8 percent, with year-over-year growth slowing from an increase of 0.5 percent to a fall of 0.8 percent.

South Korea industrial output expected to rebound by 0.6 percent in May after dropping 0.9 percent in April.

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.