As semiconductor exports drive economic improvement in South Korea, a national research institute has reported that uncertainties remain due to high inflation and slowing employment.
The Korea Development Institute (KDI) released its economic trends report for August on the 10th, noting significant increases in exports and facility investments, particularly in the semiconductor sector, while consumer spending also showed growth, especially in durable goods.
A KDI official stated, "Overall industrial production recorded relatively high growth rates, supported by a strong performance in the service sector and a rebound in manufacturing."
In May, total industrial production rose from 1.9% to 4.2%, driven by improvements in the service sector and a rebound in manufacturing. Mining and manufacturing production increased from -1.1% to 5.8%, with semiconductors (2.2%), automobiles (12.6%), machinery (14.4%), and electrical equipment (8.8%) all contributing to the overall growth.
Service sector production rose from 4.6% to 5.3%, maintaining steady growth, particularly in finance and insurance (9.2%) and professional, scientific, and technical services (13.7%).
Consumer spending continued to improve, with durable goods showing increased growth. The retail sales index for June rose by 4.2%, a significant increase from the previous month’s 1.5%. Sales of passenger cars (12.2%) boosted the durable goods figure (10.9%), while semi-durable goods (2.2%) and non-durable goods (1.7%) also showed consistent growth. Last month, the consumer sentiment index rose from 106.6 to 106.8, surpassing the long-term average, indicating generally positive household consumption sentiment.
Facility investment saw a substantial increase, with semiconductor-related investments performing well and machinery also rebounding, leading to an overall increase. In June, facility investment surged by 21.7%, more than doubling the previous month’s 9.7% growth.
However, the construction sector continues to struggle. In June, construction output fell by 4.0%, with residential building (-8.7%) contracting and civil engineering (-1.4%) also declining. Nonetheless, non-residential construction (22.9%) showed signs of improvement.
Exports continued to rise significantly, driven by increased demand for artificial intelligence (AI) products. However, uncertainties in trade conditions have expanded due to ongoing U.S. tariff measures and conflicts in the Middle East.
In July, exports surged by 62.8%, primarily in information and communication technology (ICT) items. Notably, shipbuilding (53.0%) saw a temporary increase, and ICT items (178.2%) continued to soar. The rise in petroleum products (39.6%) also contributed to overall growth.
Consumer prices have shown a slowdown in growth due to falling international oil prices, but they remain high. The consumer price inflation rate for July was recorded at 2.8%, down from 3.2% the previous month, influenced by a reduction in the price increase of petroleum products (15.5%).
However, core inflation rose by 2.6% compared to the previous year, reflecting slight increases in durable goods.
A KDI official remarked, "With ongoing U.S. tariff measures and instability in the Middle East, inflation rates remain high, and employment conditions are also slowing, indicating that uncertainties persist both domestically and internationally."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.