Economic Bulletin | KDI 경제교육·정보센터

Economic Trends

The Green Book: Current Economic Trends

Overview The Korean economy has seen domestic demand weaken as government measures aimed at boosting consumption expired, such as the individual consumption tax cut on cars, while exports improved due to recovering prices and volume as well as other temporary factors. The economy added fewer jobs in July than the previous month (up 354,000 up 298,000, y-o-y), despite improving job growth in the service sector, as job growth in the manufacturing sector fell sharply due to restructuring. Consumer price inflation rose at a slower rate in August compared with the previous month (up 0.7% up 0.4%, y-o-y), due to a temporary reduction in electricity rates. Mining and manufacturing production rebounded in July compared to the previous month, rising 1.4 percent, helped by the Olympics and due to a low base effect. Service output fell in July, down 0.7 percent month-on-month, due to weak wholesale retail and fewer stock transactions as well as fewer people engaging in outdoor activities due to extremely hot weather. Retail sales fell 2.6 percent in July, even though sales of semi-durable goods and nondurable goods increased, as durable goods sales dropped due to a sharp decline in automobile sales following the sunset of the individual consumption tax cut on cars. Facility investment fell sharply in July, down 11.6 percent month-on-month, due to weak transportation equipment. Construction completed rose at a slower pace compared to the previous month, up 1.3 percent, due to weak public sector investment. In July the cyclical indicator of the coincident composite index rose 0.4 points as the value of construction completed and mining manufacturing production improved, and the cyclical indicator of the leading composite index rose 0.1 points due to an increase in construction orders received. Exports increased 2.6 percent year-on-year in August, growing for the first time in 20 months since January of last year, due to more days worked and strong exports of vessels. Stock prices fell and Korea Treasury bond yields increased in August following comments from Federal Reserve Chair Janet Yellen that pointed to the increasing possibility of the Fed raising rates. Also, the Korean won continued to strengthen, but at a slower pace, against the US dollar following the Chairwomans comments. Housing prices increased at a faster rate than the previous month in August (up 0.04% up 0.07%, m-o-m) due to demand for apartments scheduled for reconstruction, while Jeonse (lump-sum deposits with no monthly payments) prices increased at the same rate (up 0.08%, m-o-m) due to increasing supply. Economic recovery could be limited if strikes in the automobile industry are prolonged, while external and internal risks to the economy, including the Feds rate hike 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 implement expansionary fiscal policies, including the supplementary budget, as well as formulate other policies aimed at increasing consumption and investment. * For further details, please refer to the attached file

Sep 2016