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  • Writer's pictureJ&J Korea

Economic Trends, August 2023

Updated: Sep 5, 2023

Here’s a look at Korea’s major economic indicators that provide an overview of the country’s recent economic developments.

Summary and Assessment*

■ The Korean economy appears to be navigating its economic trough, with a partial easing in the downturn of the manufacturing industry.

● The manufacturing industry shows signs of moderating contraction, as evidenced by a slower decrease in production and exports, notably in semiconductors..

- The downturn in semiconductor production has been tapering off steadily since March, while export volume has taken a turn towards growth.

- Moreover, automobiles maintained robust growth, and there are indications of improvement in the previously underperforming chemical and electronic parts.

● The service industry persists with moderate growth, with employment conditions remaining favorable.

- The non-manufacturing BSI and composite consumer sentiment indicators sustained their upward movement, staying above long-term averages.

- Simultaneously, consumer price inflation nosedived as the pressures from supply-side inflation receded.

● However, uncertainty persists, amplified by the continuing monetary tightening in major economies and potential setbacks in China’s economic recovery.

*All growth figures are on a year-on-year basis unless otherwise noted. This document is an English translation of the original Korean version; the Korean version takes precedence in case of any ambiguities or discrepancies.

Economic Activity

: The economy shows signs of a moderated downturn, with the service industry experiencing sustained modest growth and the contraction in the manufacturing industry partially easing.

In May, all-industry production decreased by 0.9%, similar to the previous month’s contraction of 1.0%. Yet, given the shorter workdays (-1 day → -1.5 days), this suggests a moderated downturn.

- Industrial production shrank less severely (-9.0% → -7.3%), propelled by significant growth in automobiles (16.7% → 18.5%) due to parts supply normalization and diminished declines in semiconductors (-21.1% → -16.7%), electronic parts (-29.9% → -19.9%), and chemical products (-20.0% → -16.6%).

- Services production (2.9% → 2.0%) remained on a gentle growth trajectory, stimulated by financial and insurance activities (9.9% → 9.8%), transport and warehousing (12.3% → 7.5%), and human health and social work activities (3.0% → 3.9%).

The manufacturing downturn began to ease with the average capacity utilization rate climbing to 72.9% from 70.9% and the inventory-to-shipment ratio shrinking to 123.3% from 130.1%.

- Manufacturing inventories edged up by 0.6% MoM, but with shipments rising by 6.1%, the inventory ratio saw a decline.

- Regarding semiconductors, their shipments expanded by 19.0% MoM, resulting in a lower inventory ratio of 229.5%, down from the previous month’s 265.8%.

The service industry continued its recovery pace, and the sluggishness in exports, especially in semiconductors, eased partially, indicating that the economy is moving past its trough. - The decline in exports, attributed to semiconductors and exports to China, is somewhat moderating.

- The non-manufacturing BSI on future tendency hovered slightly above the long-term average of 77.

* Non-manufacturing BSI on future tendency (SA): (Apr.) 75 → (May) 73 → (Jun.) 75 → (Jul.) 78 - The drop in semiconductor production and exports abated compared to the previous month, and the volume of semiconductor exports rebounded, hinting at a potential easing in the semiconductor market.

* Semiconductor production (%): (Mar.) -26.9 → (Apr.) -21.1 → (May) -16.7 * Semiconductor exports (%): (Apr.) -41.0 → (May) -36.2 → (Jun.) -28.0

* Semiconductor export volume index (%): (Mar.) -0.7 → (Apr.) -1.3 → (May) 8.1 - Despite the ongoing global economic slowdown, the downturn in exports may soften due to improvements in semiconductors.

* Exports (%): (Apr.) -14.4 → (May) -15.2 → (Jun.) -6.0


: Consumption growth persisted at a low ebb, yet an increase in retail sales of durable goods and an improvement in the CCSI hint at a potential deceleration of the downturn.

  • May’s retail sales recorded a –0.6% growth, continuing the previous month’s trend (-1.4%), but on a MoM basis, they gained 0.4% with the eased slump in durable goods sales.

  • Services production expanded by 2.0%, a smaller increase than the previous month’s 2.9%, mainly due to base effects.

  • The Composite Consumer Sentiment Index (CCSI) for June remained above the benchmark of 100, posting 100.7.

Equipment Investment

: Equipment investment sustained the previous month’s trend, with leading indicators remaining weak, indicating that investment demand continues to be muted.

  • May registered a -4.3% growth rate, a reduction from the previous month’s 4.4%, mainly due to base effects, but its MoM change increase to 3.5%, up from 0.9%.

  • The average capacity utilization rate in the manufacturing industry (70.9% → 72.9%) hovered at a low level, with corresponding leading indicators seeming lethargic.

Construction Investment

: The expansion of construction investment slowed, with related leading indicators persistently weak.

  • In May, the value of completed construction (constant) displayed reduced growth of 5.4%, down from the previous month’s 12.3%, mainly attributed to base effects. It also marked a 0.5% increase on a SA MoM basis.

  • Housing starts and construction orders received continued to experience significant declines, indicating potential limitations on the growth of construction investment led by the housing sector.


: Consumer price inflation fell sharply, attributed to eased supply-side inflationary pressures and a slower escalation in personal services costs.

  • June’s headline inflation came in at 2.7%, decelerating from the previous month’s 3.3%.

  • Commodity prices (3.0% → 2.0%) exhibited an accelerating contraction as petroleum prices fell faster.

  • Service price inflation decelerated to 3.3%, down from the previous month’s 3.7%, as the surge in personal services (5.6% → 5.0%) lost momentum.

  • A faster decline in import prices, primarily driven by crude oil, alleviated supply-side inflationary pressures.


*This article is extracted from Invest KOREA information center, 2023


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