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PRESS RELEASES

Production and Investment Slow Down while Exports Continue to Rise

  • DivisionEconomic Policy Bureau - Economic Analysis Division
  • DateAugust 10, 2018
  • Tel044-215-2736

Current Economic Situation, August 2018

 

Production and Investment Slow Down while

Exports Continue to Rise

 

 

The Korean economy has been on a recovery path backed by strong exports. However, production and investment have been weak and external uncertainties are increasing amid the trade conflict between the US and China.

 

The economy added 106,000 jobs year-on-year in June led by the service sector. Job markets remained weak due to the struggling manufacturing sector and declining working age population. Young adult unemployment fell (10.4% → 9.0%, down 1.4%p, y-o-y).

 

Consumer prices rose 1.5 percent year-on-year in July. Consumer prices held steady (up 1.5% → up 1.5%, y-o-y, compared with a month ago), despite an increase in livestock product prices and gas utilities rates, as the prices for certain public services and personal services declined.

 

Industrial production declined in June (up 0.2% → down 0.7%, m-o-m). Mining and manufacturing production fell (up 1.2% → down 0.6%, m-o-m) due to a slowdown in automobiles and chemical products. Service output increased (down 0.2% → up 0.2%, m-o-m), despite a fall in professional, scientific & technical services, as healthcare & social welfare services and wholesale & retail rose.

 

Retail sales rebounded in June (down 1.1% → up 0.6%, m-o-m) as the sales of semi-durable goods and nondurable goods increased. The sales of durable goods, such as automobiles, declined.

 

Facility investment continued to be weak in June (down 3.0% → down 5.9%, m-o-m), despite an increase in transportation equipment, due to a drop in machinery investment. Construction completed fell (down 2.7% → down 4.8%, m-o-m) due to a decline in building construction and civil engineering works.

 

In June, the cyclical indicator of the coincident composite index fell 0.2 points to 99.4, and the cyclical indicator of the leading composite index fell 0.1 points to 100.0.

 

Exports exceeded US $50 billion for the fifth consecutive month in July due to strong petroleum products, steel and semiconductors. In January-July 2018, exports increased 6.4 percent compared to the same period in the previous year.

 

In July, KOSPI fell amid increasing concerns about the trade conflict between the US and China, despite expectations for strong US corporate earnings and the Bank of Korea’s decision to hold the interest rate unchanged. The dollar-won exchange rate increased due to a strong dollar, and government bond yields on short- and medium-term bonds rose.

 

Housing prices continued to fall in July (down 0.02% → down 0.02%, m-o-m), led by houses outside the Seoul metropolitan area, and Jeonse (lump-sum deposits with no monthly payments) prices remained stable across the country (down 0.25% → down 0.21%, m-o-m).

 

The economy is expected to continue to recover given improving global economies, strong exports and increased fiscal spending through the supplementary budget. However, job markets have yet to recover and external risks linger, such as the trade conflict between the US and China, Fed’s rate hikes and high oil prices.

 

The government will strengthen its risk management, and will work to help improve the job market and the real economy by maintaining expansionary fiscal management and successfully implementing the measures for ‘growth through innovation’.

 

 

 

Key Statistics

 

 

Employment

 

 

2015

2016

2017

2018

Annual

Q3

Q4

Annual

Q1

Q2

Q3

Q4

Jun

Q1

Q2

May

Jun

Number of employed (million)

26.18

26.41

26.72

26.62

26.73

26.10

26.92

27.00

26.88

27.02

26.28

27.02

27.06

27.13

Employment rate (%)

60.5

60.6

61.2

60.9

60.8

59.6

61.3

61.4

61.0

61.5

59.6

61.2

61.3

61.4

(Seasonally adjusted)

60.5

60.6

60.6

60.7

60.8

60.9

60.8

60.8

60.9

60.8

60.9

60.7

60.6

60.7

 

 

Consumer Price Index

 

 

2017

2018

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

y-o-y

2.2

2.6

2.1

1.8

1.3

1.5

1.0

1.4

1.3

1.6

1.5

1.5

1.5

m-o-m

0.2

0.6

0.1

-0.2

-0.7

0.3

0.4

0.8

-0.1

0.1

0.1

-0.2

0.2

 

 

Mining and Manufacturing Production

(q-o-q, m-o-m, %)

Mining and Manufacturing2

2017

2018

Annual

Q2

Jun

Q1

Q2¹

Apr

May¹

Jun¹

Mining

(q-o-q, m-o-m)

-

-1.0

-1.0

-1.2

2.7

3.3

1.2

-0.6

(y-o-y)

1.9

2.2

1.2

-2.2

0.6

1.0

1.2

-0.4

Manufacturing

Production

(q-o-q, m-o-m)

-

-1.2

-1.2

-1.3

2.9

3.4

1.3

-0.8

(y-o-y)

1.6

1.9

0.8

-2.8

0.4

0.8

1.0

-0.7

Shipment

-Domestic consumption

-Exports

0.7

1.4

-0.3

0.7

1.8

-1.0

0.8

1.7

-0.8

-3.8

-3.0

-5.0

-0.8

-1.3

-0.2

-1.6

-0.8

-2.6

1.2

0.7

1.8

-2.1

-3.7

0.2

Inventory3

8.8

0.1

0.1

10.5

8.4

9.5

5.5

8.4

Average operation ratio

72.6

72.0

71.8

71.0

73.3

72.5

74.0

73.5

Production capacity

(y-o-y)

1.1

1.7

1.4

-0.3

-1.1

-1.0

-1.1

-1.2

  1. 1. Preliminary

  2. 2. Including mining, manufacturing, electricity and gas industry

  3. 3. End-period

 

 

Service Output

(q-o-q, m-o-m, %)

 

2016

2017

2018

Annual

Annual

Q1

Q2

Q3

Q4

Q1

Q2¹

Apr

May¹

Jun¹

Service

activity index

2.6

1.9

0.7

0.5

0.9

0.2

1.0

0.2

0.0

-0.2

0.2

  1. 1. Preliminary

 

 

Retail Sales

(q-o-q, m-o-m, %)

 

2015

2016

2017

2018

Annual

Annual

Q4

Annual

Q1

Q2

Q3

Q4

Q1

Q2¹

May¹

Jun¹

Retail sales

4.1

3.9

1.4

1.9

0.4

1.0

0.2

0.9

3.0

0.7

-1.1

0.6

(y-o-y)

-

-

2.2

-

1.6

1.0

3.2

2.1

5.0

4.7

4.5

4.0

  1. 1. Preliminary

     

     

Facility Investment Index

(q-o-q, m-o-m, %)

 

2015

2016

2017

2018

Annual

Annual

Annual

Q1

Q2

Q3

Q4

Q1

Q2¹

Apr

May¹

Jun¹

Facility investment index

6.9

-1.3

14.1

6.0

3.1

0.2

-1.7

8.4

-10.8

-2.5

-3.0

-5.9

y-o-y

-

-

-

18.2

17.8

20.6

2.0

9.4

-5.7

1.6

-3.7

-13.8

  1. 1. Preliminary

 

 

Construction Completed

(q-o-q, m-o-m, %)

 

2015

2016

2017

2018

Annual

Annual

Annual

Q1

Q2

Q3

Q4

Q1

Q2¹

Apr

May¹

Jun¹

Construction completed (constant)

5.0

15.4

10.1

4.3

-0.2

-0.3

-0.1

2.5

-5.6

1.9

-2.7

-4.8

y-o-y

-

-

-

17.7

13.6

12.7

-0.5

1.5

-4.2

-1.2

-3.2

-7.7

  1. 1. Preliminary

 

 

Composite Index of Coincident and Leading Indicators

 

 

2017

2018

Nov

Dec

Jan

Feb

Mar

Apr¹

May¹

Jun¹

Cyclical indicator of coincident composite index

100.2

99.8

99.8

99.8

99.8

99.7

99.6

99.4

(m-o-m, %)

0.0

-0.4

0.0

0.0

0.0

-0.1

-0.1

-0.2

Cyclical indicator of leading composite index

100.7

100.7

100.8

100.6

100.4

100.1

100.1

100.0

(m-o-m, %)

-0.1

0.0

0.1

-0.2

-0.2

-0.3

0.0

-0.1

  1. 1. Preliminary

 

 

Exports and Imports

(US$ billion, y-o-y, %)

 

2015

2016

2017

2018

Annual

Annual

Annual

Q1

Q2

Q3

Q4

Jul

Q1

Q2

Jun

Jul¹

Exports

526.76

495.43

573.69

132.06

147.04

151.05

143.54

48.83

145.09

152.10

51.18

51.88

(y-o-y)

-8.0

-5.9

15.8

14.7

16.7

24.0

8.4

19.4

9.9

3.4

-0.2

6.2

Average daily exports

1.93

1.81

2.13

1.96

2.21

2.13

2.23

2.08

2.17

2.30

2.38

2.16

Imports

436.50

406.19

478.48

116.43

117.80

120.85

123.40

38.61

132.31

132.82

44.94

44.88

(y-o-y)

-16.9

-6.9

17.8

24.1

18.6

17.9

11.6

15.7

13.6

12.8

10.8

16.2

Average daily imports

1.60

1.49

1.78

1.72

1.77

1.70

1.91

1.64

1.97

2.01

2.09

1.87

1. Preliminary

 

Please refer to the attached PDF