KDI: Economic Improvement Led by Semiconductors Is Broadening, but Inflation and Employment Worries Persist

[Financial News]  The Korea Development Institute (KDI) said the South Korean economy has recently been improving, with semiconductors at the center of the recovery. However, it added that uncertainty remains over the situation in the Middle East, inflation, and a slowdown in employment.
On the 10th, KDI said in its August economic trends report that "industrial output is posting a relatively strong increase as the service sector continues to perform well and manufacturing rebounds."
Overall industrial output rose from 1.9% to 4.2%, helped by an increase in working days in June of 1.5 days and stronger growth in both services and manufacturing.
Service-sector output increased from 4.6% to 5.3%, continuing a solid upward trend led by finance and insurance, which rose 9.2%, and professional, scientific and technical services, which climbed 13.7%.
Manufacturing output also rebounded in most industries, including automobiles, which swung from -5.3% to 12.6%, machinery and equipment from 3.3% to 14.4%, and electrical equipment from -4.0% to 8.8%.
Consumption continued to improve, with the pace of growth widening, especially in durable goods, which rose from -3.6% to 10.9%.
Passenger car consumption rose sharply, from -10.7% to 12.2%, as demand was partly brought forward ahead of the normalization of parts supply and the end of the individual consumption tax cut on automobiles. Home appliance sales also expanded, with growth rising from 1.5% to 13.1%, helped by gift certificate refund promotions from major companies.
Facility investment in June rose from 9.7% to 21.7%, with both machinery and transportation equipment posting sharp gains.
KDI said facility investment is likely to maintain a favorable trend, led by semiconductors.
Construction investment remains sluggish, especially in residential buildings, with construction completed in June down 4.0%. Non-residential construction, however, is gradually improving.
Still, KDI said domestic and external uncertainties remain, including U.S. tariff measures, instability in the Middle East, high inflation, and weakening employment conditions.
The labor market continues to slow, with job growth staying at a low level. Employment rose by 63,000 in June, an improvement from the previous month’s decline of 40,000, but it still fell far short of the first-quarter average of 183,000.
Consumer prices rose 2.8% in July, with the pace of increase easing as international oil prices fell, but inflation remained elevated. Core inflation, which excludes food and energy, edged up from 2.5% to 2.6%, led by durable goods.

[email protected] Jung Sang-gyun Reporter