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  • Writer's pictureJ&J Korea

Economic Trends, September 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 contraction in the Korean economy is gradually moderating.

● Services production continues on a modest upward trajectory, and the sluggishness in manufacturing production is showing signs of moderation, led by semiconductors.

- The service industry continued a robust trend in employment, while the manufacturing industry witnessed a reduced decline in production and a decrease in inventory.

- In particular, semiconductors, a significant factor contributing to the slowdown, exhibited signs of easing with a substantial increase in export volumes.

- Furthermore, both the CCSI and the BSI for manufacturing and non-manufacturing sectors recorded modest increases.

● However, strong downside risks persist for the global economy, including rising commodity prices and a delayed resurgence in China’s economy

- Concerns over a surge in grain prices have been heightened due to geopolitical factors such as Russia’s invasion of Ukraine and poor weather conditions, in addition to recent oil price hikes.

- Amid the ongoing sluggishness of global manufacturing, China seems to be experiencing increased downside risks, primarily centered around its real estate market.

* 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

: Economic activity is showing signs of a gradual reduction in sluggishness, with manufacturing experiencing a slowing decline and services maintaining a modest increase.

● June’s all-industry production recorded a 1.1% growth, higher than the previous month (-1.1%).

- Industrial production (-7.6% → -5.6%) showed a diminished contraction, bolstered by sustained robust growth in automobiles (18.7% → 10.8%) and attenuated declines in semiconductors (-18.7% → -15.9%), electronic parts (-19.9% → -12.2%), and chemical products (-16.7% → -10.4%).

- Services production (1.9% → 3.5%) sustained a gradual increase, led by financial and insurance services (8.3% → 10.1%), transport and warehousing (8.4% → 7.4%) professional, scientific, and technical activities (1.7% → 4.0%).

● The average capacity utilization rate in manufacturing (72.8% → 71.9%) persisted at a low level, but the inventory-to-shipment ratio declined significantly (122.7% → 111.4%), signaling a slackening in the sluggish trend.

- The decline in the inventory-to-shipment ratio came as shipments rose by 3.3% MoM and inventories declined by 6.2%.

● The slump in the semiconductor cycle is showing signs of abating, with sustained improvement in business sentiment indices.

- A growing number of indicators hint at an easing downturn in the semiconductor market, evidenced by escalating shipment and inventory indices and a surge in export volume, concurrent with the waning decline in semiconductor production

* Semiconductor production (%): (Apr.) -21.6 → (May) -18.7 → (Jun.) -15.9

* Semiconductor shipment (%): (Apr.) -33.5 → (May) -20.5 → (Jun.) 15.6 * Semiconductor inventory (%): (Apr.) 79.1 → (May) 80.7 → (Jun.) 49.1

* Semiconductor export volume index (%): (Apr.) -1.3 → (May) 8.1 → (Jun.) 21.6

- Exports maintained a trend similar to the previous month when excluding temporary factors, and both manufacturing and non-manufacturing sectors showed a modest recovery in business sentiment.


: The Composite Consumer Sentiment Index (CCSI) maintains its upward trajectory, paralleled by significant growth in passenger car retail sales, signaling a partial alleviation of the consumption downturn.

● Retail sales, indicative of goods consumption, registered a 1.4% growth in June, driven by durable goods, surpassing the previous month’s -0.6% and showing a 1.0% MoM increase, suggesting a softening contraction.

● Services production rose by 3.5%, higher than the previous month (1.9%), which implies a possibility of continued modest growth in service consumption.

● The CCSI pursued its ascension in July, recording 103.2.

Equipment Investment

: The decline in equipment investment temporarily slowed, influenced by transport equipment, while sluggish leading indicators suggests that future demand for equipment investment may be limited.

● June’s equipment investment recorded a -0.6% growth, led by transport equipment, exhibiting a less pronounced decline than the previous month’s -4.5%.

● The manufacturing average capacity utilization rate (72.8% → 71.9%) remained low, and leading indicators related to equipment investment exhibited sluggishness.

Construction Investment

: Construction investment sustained high growth largely due to the base effect, though the sluggishness in leading indicators signals limited growth in construction investment going forward.

●June’s value of completed construction (constant) registered an 8.9% growth, outperforming the previous month’s 6.1%.

●In contrast, construction orders received (current, -42.7%), a leading indicator, showed a significant plunge, with sluggishness persisting in housing permits and starts, suggesting a potential slowdown in construction investment.


: Headline inflation fell sharply, reflecting both temporary factors such as the base effect and diminishing supply-side inflationary pressures.

●July’s headline inflation came in at 2.3%, lower than the previous month’s 2.7%, with price growth decelerating across all categories. ●Nonetheless, July’s drop in inflation also reflects the base effect from last year’s inflation peak (6.3%). Considering escalating oil prices and reduced harvest yield, inflationary pressures could intensify in certain categories.


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


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