The Korea Development Institute (KDI) said Korea's economy is expanding its improvement, led by semiconductor-related institutional sectors. However, it said inflation remains elevated while job growth is slowing, and domestic and external uncertainties persist, including U.S. tariff measures and instability in the Middle East.
The Korea Development Institute (KDI) said on Aug. 10 in its "August economic trends" that "our economy is expanding its improvement, centered on semiconductor-related institutional sectors," and noted, "Exports and facility investment, led by semiconductors, posted strong growth, while consumption also saw a wider increase, centered on durable goods."
KDI offered a positive assessment of exports, facility investment and domestic demand. Exports in July rose 62.8% from a year earlier. Facility investment in June also increased 21.7% from a year earlier, showing strong growth centered on semiconductor manufacturing equipment. KDI said, "Exports continued to record high growth on the back of robust demand related to artificial intelligence (AI), but uncertainty in trade conditions is increasing due to U.S. tariff measures and tensions in the Middle East."
The retail sales index, a domestic demand indicator, rose 4.2% in June from a year earlier, widening from 1.5% in the previous month. The consumer sentiment index in July was 106.8, above the long-term average. When the consumer sentiment index exceeds 100, it means more people expect their living conditions, the economy and income to improve going forward.
Employment, however, continued to slow. The number of employed people in June increased by 63,000 from a year earlier, an improvement from the previous month's decrease of 40,000, but far below the first quarter's monthly average increase of 183,000. KDI said, "The slowdown is continuing, with sharp declines persisting in construction and manufacturing."
Consumer prices rose at a slower pace due to falling international oil prices but remained elevated. The consumer price inflation rate in July was 2.8%, down from 3.2% in the previous month. The slowdown largely reflected a sharp narrowing in petroleum price increases due to lower international oil prices. However, core inflation excluding food and energy inched up from 2.5% to 2.6%.
Construction investment also remained sluggish. Construction completed in June fell 4.0% from a year earlier. KDI assessed that the slump in construction investment is continuing, centered on residential building. With housing permits (18,000 units) and starts (24,000 units) remaining low, and construction costs rising, it projected the pace of recovery in construction investment would be moderate.