Seoul: South Korea's economic slowdown has shown signs of "slight" improvement, largely driven by a rebound in consumer spending, despite a continued slump in the construction sector, a state-run think tank said Tuesday.
According to Yonhap News Agency, the Korea Development Institute (KDI) stated in its monthly economic assessment, "Recently, our economy has seen a slight easing in its overall sluggishness, led by consumer spending, despite continued weakness in construction investment." The report highlighted that construction investment has continued to post a sharp decline, while facility investment is also undergoing an adjustment. In addition, manufacturing investment remains relatively sluggish.
Data from Statistics Korea indicated that overall industrial output remained weak in July, with construction output plummeting 14.2 percent year-on-year, accelerating from the 12.1 percent drop in June. The KDI attributed the improvement in consumer sentiment to falling interest rates and recent government-led stimulus measures, including cash handouts, dubbed "consumption coupons."
In August, the Composite Consumer Sentiment Index reached 111.4, marking its highest level in over seven years, driven by robust exports and optimism surrounding the government's supplementary budget, according to the Bank of Korea. The KDI noted that retail sales, which are closely tied to goods consumption, have seen a rebound, while service consumption, particularly in accommodation and food services, has also shown signs of recovery.
Despite easing trade uncertainties following recent tariff agreements between the United States and its major trading partners, the KDI warned that downward pressure on South Korea's exports continues. In late July, South Korea and the U.S. reached an agreement to lower proposed U.S. tariffs on South Korean imports from 25 percent to 15 percent, in exchange for investing US$350 billion in the U.S.
The report highlighted, "While semiconductor exports continue to show moderate growth, a decline in exports to the U.S. reflects the impact of higher U.S. tariffs."