Macro/ Strategy

Production maintained growth momentum thanks to domestic drivers

Because February coincided with the Lunar New Year, production activities were less active than the same period last year. The Industrial Production Index (IIP) in February 2026 increased by only 1.0% YoY and decreased by -18.4% MoM. The PMI in February reached 54.3 points, up nearly 2 points from 52.5 in January. Increased production, driven by demand, led to increased labor recruitment and procurement activities. Strong domestic demand continued to drive up total orders despite weakening export orders.

Domestic consumption remained positive

Total retail sales of goods and consumer service revenue in February 2026 increased by 8.48% YoY, and the cumulative two-month increase was 7.93% YoY. Tourism continued to be a driving force.

Inflation surged due to Lunar New Year

The headline CPI increased by 3.35% YoY in February 2026. For the first two months, the headline CPI increased by 2.94% YoY. Consumer demand and stockpiling of food for the Lunar New Year increased significantly. In the first two months of the year, the CPI for the transportation group decreased by 3.48% YoY. However, with the escalating tensions between the US and Israel and Iran, inflation in this group was likely to rise. 

Interest Rates Trend Upward

Interbank market interest rates experienced unusual fluctuations in early February and March. Given the unpredictable outcome of the US-Israel and Iran conflicts, interest rates may remain at a higher level than in 2025, at 5-6%, due to expectations of high inflation in the near future.