Economic Bulletin | KDI 경제교육·정보센터

Economic Trends

The Green Book: Current Economic Trends

Overview The Korean economy has seen domestic demand pick up as government measures helped boost consumption, while production remains weak due to export slowdown. The economy added more jobs in June than the previous month (up 261,000 up 354,000, y-o-y) led by the service sector, due to a low base effect from a year ago when service industries were hit by the MERS outbreak. Job growth continued to decelerate in the manufacturing sector. Consumer prices rose at a slower rate in July compared with the previous month (0.8% 0.7%, y-o-y), as the effect of public service fee increases diminished. Mining and manufacturing production fell 0.2 percent month-on-month in June as the production of automobiles, steel and vessels declined due to a high base effect and sluggish exports. Service output continued to grow in June, up 1.0 percent month-on-month, backed by an increase in automobile sales and stock transactions. Retail sales rose 1.0 percent in June led by durable goods sales, as automobile sales jumped before the sunset of the individual consumption tax cut on cars, scheduled at the end of June. Facility investment continued to increase in June, up 4.5 percent month-on-month, led by transportation equipment. Construction completed rose 3.1 percent from the previous month, helped by the public sector which has been boosted by frontloaded budget spending. In June, the cyclical indicator of the coincident composite index rose 0.2 points, backed by strong production and retail sales indices, and the cyclical indicator of the leading composite index fell 0.1 points, due to a decrease in construction orders received. Exports declined at a faster pace in July, down 10.2 percent year-on-year, partly due to fewer days worked and suspended delivery of vessels. Stock prices rose and Korea Treasury bond yields declined in July in line with increased expectations for expansionary monetary policies in major economies following the Brexit referendum. The Korean won strengthened against both the US dollar and the Japanese yen as global risk aversion eased. Housing prices increased at the same rate as the previous month in July (up 0.04%), while Jeonse (lump-sum deposits with no monthly payments) prices rose at a slower pace (up 0.11% up 0.08%). Recovery in domestic demand could be limited due to government measures to stimulate the economy becoming less effective, for example the expiration of the individual consumption tax cut on cars, while external and internal risks to the economy from Brexit and industrial restructuring remain. The government will closely monitor domestic and global economic developments as well as examine the possible impact of internal and external uncertainties on domestic financial markets. The government will actively respond to any risks to the economy and employment by implementing expansionary fiscal policies, including the supplementary budget, as well as other policies aimed at increasing consumption and investment. * For further details, please refer to the attached file

Aug 2016