Korea Development Institute (KDI), the state-run economic research institute, has issued a positive economic assessment for the second consecutive month, stating that "the economy is improving, led by consumption."
The institute ruled out the possibility of a one-time temporary improvement. It noted that the widening export growth reflects price increases driven by the semiconductor boom, while volume-based growth is gradually moderating.
In its December Economic Trends report released Wednesday, KDI stated that "the Korean economy is maintaining a moderate pace of improvement led by consumption, despite continued sluggishness in the construction sector."
By using the term "economic improvement" for the second straight month, KDI has delivered back-to-back positive assessments.
The institute attributed the recovery momentum to consumption. Interest rate cuts are taking effect with a time lag, while government support policies such as consumption coupons have continued to stimulate spending, it explained.
Average retail sales for September-October rose 1.3 percent year-on-year. Service sector production increased 3.6 percent during the same period, with particularly strong growth in accommodation and food services (1.9 percent) and arts, sports and leisure (9.4 percent).
"Service sector production has shown a favorable trend, driving moderate growth in overall industrial production," KDI said. "Employment in consumption-related sectors is also gradually recovering from its slump."
Average facilities investment for September-October also surged, led by automobiles (14.8 percent) and other transportation equipment (34.8 percent). This suggests that the warmth starting from consumption is spreading throughout the broader economy.
However, the construction sector remains constrained. Despite improvements in building orders, a leading indicator, orders are not smoothly translating into construction starts, and project durations are extending, limiting recovery.
Exports grew centered on semiconductors. Daily average semiconductor exports last month jumped 44.7 percent year-on-year, with price factors playing a larger role than volume.
Semiconductor export prices rose sharply: negative 3.1 percent in August, negative 0.5 percent in September, then surging 19.9 percent in October. In contrast, semiconductor export volumes showed signs of deceleration: 32.7 percent growth in August, 23.1 percent in September, and 5.6 percent in October. This suggests the export boom is largely attributable to price surges.
"While the Korea-U.S. tariff follow-up agreement has been reached, uncertainty in the trade environment persists, including the pending U.S. Supreme Court ruling on the legality of reciprocal tariffs," a KDI official said. "This is by no means a situation where we can let our guard down."
