Second-Quarter Economic Growth Rate Breaks Forecast Again... 'Threefold Surprise' [Summary]

[Financial News] South Korea's economic growth rate for the second quarter of this year came in at three times the forecast. As a result, the likelihood that annual growth will exceed 2.6% has risen sharply.
According to the Bank of Korea on the 23rd, real Gross Domestic Product (GDP) in the second quarter rose 0.6% from the previous quarter. That was 0.4 percentage points higher than the 0.2% estimate released in the May economic outlook. The stronger-than-expected result had already been foreshadowed in the Bank of Korea's "Economic Situation Assessment" released on the 17th. On a year-on-year basis, GDP grew 3.7%.
By category, private consumption increased 0.4% from the previous quarter as both goods, such as home appliances, and services, such as restaurants and lodging, rose. Compared with the same period a year earlier, it grew 2.5%. Government consumption also rose 0.2%, led by spending on health insurance benefits. On a year-on-year basis, the figure was 2.2%.
Investment in intellectual property products grew 3.3%, driven mainly by Research and Development (R&D) and software. This was the highest reading in 14 years and three months, since the first quarter of 2012, when it reached 5.4%. Facility investment also increased 0.2% as machinery, including semiconductor manufacturing equipment, expanded. Construction investment, however, shifted from a 1.4% increase in the previous quarter to a 0.2% decline this time, due to weakness in civil engineering construction.
Exports grew 1.4%, led by semiconductors and other information technology (IT) products, as well as machinery and equipment. While that fell short of the previous quarter's 5.9% increase, the highest since the third quarter of 2020, exports were up 9.0% from a year earlier. The contribution was 0.7 percentage points. Imports rose 0.8% as machinery and equipment, automobiles, and other items increased. Compared with the same period last year, imports were up 6.3%.
Looking at economic activity by sector, agriculture, forestry and fisheries fell 7.1% from the previous quarter, led by crop farming and fishing. Electricity, gas and water supply also declined 1.3%, mainly due to water supply and raw material recycling businesses. Construction also contracted 1.9% on the back of civil engineering work.
By contrast, manufacturing rose 1.2% on gains in computers, electronic and optical products, and machinery and equipment. The services sector increased 1.1%, led by wholesale and retail trade, lodging and food services, as well as finance and insurance.
Real Gross Domestic Income rose 3.6% in the second quarter from the previous quarter, six times the GDP growth rate. Compared with a year earlier, it increased 15.6%. The gain was attributed to higher semiconductor prices. In the first quarter, GDP grew 3.8% year on year, while GDI jumped 13.2%. The gap between the two indicators, at 9.4 percentage points, was the largest since the statistics began in 1960.
In May, the Bank of Korea projected South Korea's annual growth rate at 2.6%. After the first quarter came in at 1.8%, double the 0.9% forecast, and this quarter also reached three times the estimate, the economy has gained a favorable position. The Bank of Korea now expects this year's figure to exceed 2.6%.
[email protected] Kim Tae-il Reporter