Economic Bulletin | KDI 경제정보센터

Economic Trends

The Green Book: Current Economic Trends

Overview Production slowed while domestic consumption faltered partly due to the resumption of sales taxes on luxury goods. The economy added 339,000 jobs year-on-year in January as employment increased in both the manufacturing and service sectors. Consumer price inflation rose at a faster pace year-on-year in February, from 0.8 percent in the previous month to 1.3 percent, despite low petroleum product prices, as unfavorable weather conditions pushed up fresh food prices. Mining and manufacturing production fell 1.8 percent month-on-month in January due to weak exports and as the luxury goods sales tax on cars resumed. In January, service output and retail sales declined from the previous month, down 0.9 percent and 1.4 percent, respectively, due to a high base effect and as the indices were temporarily affected by the resumption of the luxury goods sales tax on cars. Year-on-year, service output improved 3.0 percent and retail sales rose 4.1 percent. Facility investment turned negative in January, going down from a 3.7 percent rise in the previous month to a 6.0 percent fall, as transportation equipment moved downwards in line with the luxury goods sales tax on cars, which revived in the month. Construction completed continued to improve, up 1.3 percent, led by building construction. Both the cyclical indicator of the coincident composite index and the cyclical indicator of the leading composite index declined in January, each down 0.2 points. Exports continued to decline year-on-year in February due to drops in unit prices amid low international oil prices and plummeting vessel exports (down 46.0%), which widely fluctuate from month to month. However, the index fell at a slower rate, from an 18.8 percent decrease in the previous month to a 12.2 percent fall, while export volumes shifted to an upward trajectory. Financial markets became stable later in February after going up and down early in the month, as the KOSPI rose and interest rates fell. The Korean won depreciated against both the US dollar and Japanese yen. Housing prices stayed flat and Jeonse (lump-sum deposits with no monthly payments) prices continued to stabilize (up 0.11%) in February. Although external uncertainties, such as Chinas slowdown, the Feds rate increases and low oil prices, are posing risks to the economy, exports are gradually turning around and domestic consumption is expected to improve following the extension of the luxury goods sales tax cut. The government decided to extend the sales tax cut until June this year, which had expired at the end of 2015. In order to maintain a recovery momentum gathered backed by strong domestic consumption and further have it to lead to job creation, the government accelerated its first quarter spending by more than 21 trillion won through the frontloading of public sector expenditures while working to promote private sector investment. The government will closely monitor internal and external economic developments as well as examine uncertainties and their possible impact on domestic financial markets, and will be prepared to make appropriate responses if necessary. * For further details, please refer to the attached file

Mar 2016