Production in the service sector backtracked 0.4 percent from December but expanded 2.4 percent from a year earlier, the report showed.

For all industries, output moved down 1.7 percent from the previous month, the sharpest drop in 22 months, although rising 0.7 percent vis-a-vis a year earlier.

"There was a sharp rise in output of automobiles in December as local carmakers made a determined effort to sell more cars, which caused numbers during that month to rise sharply," said Jeon Baek-geun, director of the short-term industrial statistics division. He said this "high base effect" caused January's figures to fall in comparison.

Car production accounts for roughly a third of industrial output figures, which is linked to other businesses, such as financing and parts production. Companies such as Hyundai Motor Co.and Kia Motors Corp. achieved combined annual sales of 8 million units last year, thanks in large part to aggressive marketing in December.

Jeon added shipbuilding numbers were weak, which is usual for the start of any year.

Output in manufacturing and mining accounted for 33.24 percent of all industrial production last month, with the service and construction sectors making up 53.71 percent and 6.45 percent, respectively. Public administration and utilities made up 6.6 percent of the total.

Retail sales and investment, key barometers of economic health, all fell in the cited month. Retail sales declined 3.1 percent on-month while investment dropped 7.1 percent. Compared to the year before, retail numbers were again down 3.1 percent, although investment jumped 14.3 percent.

The statistical office said retail was hurt because the Lunar New Year fell in February instead of January, which was the case in 2014. This shift in date caused people to hold off on buying for a month, it claimed. The rise in cigarette prices by some 2,000 won ($1.81) also affected retail sales.

The latest data, on the other hand, showed construction work advancing 6.1 percent on-month and falling 2.9 percent from the year before.

Reflecting some signs of a rebound in the construction sector, the number of new orders surged 28.3 percent on-year.

The finance ministry claimed that despite the setback, there is a steady rise in business and consumer sentiments that should positively affect the country's production in the coming months. 

  "Because of seasonal factors, such as the shifting date of the Lunar New Year, it is always best to see January numbers in conjunction with proceeding or following months to get a better understanding of trends," the ministry said.

It said if January figures for industrial and retail output are combined with December's, both numbers actually grew. (Yonhap)