The Green Book: Current Economic Trends
Overview Second quarter indicators reflecting the real economy showed signs of earlier-than-expected improvement, helped by temporary factors such as the tax break for new car purchase and front loaded fiscal spending as well as regaining consumer and investment confidence. However, most indicators have not recovered to the pre-crisis level. In June, month-on-month mining and manufacturing production increased for the sixth straight month, growing 5.7 percent, although on a year-on-year basis, the index contracted 1.2 percent. Service output shifted to an increase by 1.7 percent month-on-month from the previous months 0.9 percent loss, posting a year-on-year gain of 2.6 percent. Consumer goods sales rose 1.8 percent month-on-month in June, recording a year-on-year increase of 7.3 percent, thanks to brisk durable goods sales affected by the tax break for new car purchase. Facilities investment, while posting a year-on-year fall of 5.6 percent, registered a month-on-month gain of 9.5 percent in June, as transportation equipment and machinery investments improved. Construction completed surged 12.1 percent month-on-month, or 14.0 percent year-on-year, thanks to strong performance both in the public and private sectors. Exports in July deepened its year-on-year decline from the previous months 12.4 percent to 20.1 percent, due to a slower pace of growth in vessel exports and a high base effect. The total number of workers hired increased year-on-year in June for the first time since November 2008 from a loss of 219,000 to a gain of 4,000, affected by the governments job creation projects. However, the unemployment rate slightly rose from 3.8 percent a month ago to 3.9 percent. Consumer prices, despite price rises in oil and agricultural/livestock products, decelerated a year-on-year increase in July from 2.0 percent to 1.6 percent, due to a high base effect. Although domestic financial markets continue to be stabilized with rising stock prices and falling foreign exchange rates, uncertainties surrounding international financial markets exist, with a possibility of further deterioration in financial institutions balance sheets in developed countries. To sum up, despite the domestic economy recovering at a faster pace, it is uncertain that the recovery will continue in the second half when fiscal spending contracts. The Korean government will continue expansionary macroeconomic policies until clear signs of private sector-led economic recovery are detected, while closely monitoring the changes in economic situation. On the other hand, the governments plans to create jobs, support the working class, and boost consumption and investment will be carried out as are intended, and any causes for instability in domestic economy will be actively responded to, in particular the overheated real estate market. * For further details, please refer to the attached file
Aug 2009
