Seoul: The South Korean economy continues to show weak production gains, largely due to a slump in the construction sector, but consumer spending has shown some improvement as of late, a state-run think tank said Thursday.
According to Yonhap News Agency, the Korea Development Institute (KDI) in its monthly economic assessment report stated, "Recently, the South Korean economy has been experiencing sluggish production growth primarily due to weakness in the construction sector but consumption conditions are showing signs of partial recovery."
The report highlighted that construction investment has been posting a sharp decline. In June, government data indicated that overall industrial output remained weak. Construction output, in particular, experienced a significant drop, falling by 12.3 percent on-year, following a sharper 19.8 percent decline in May.
The KDI pointed to falling interest rates and government-led stimulus measures as contributors to the improvement in consumer sentiment. The report noted, "Consumption conditions appear to be improving, with the consumer sentiment index remaining at a relatively high level."
Despite easing trade uncertainties following recent tariff agreements between the United States and its major trading partners, the KDI cautioned that downward pressure on South Korea's exports persists. Last week, an agreement between South Korea and the U.S. was reached 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.
"Although trade-related uncertainties have somewhat diminished due to recent agreements between the U.S. and major economies, prolonged high tariffs continue to exert downward pressure on the economy," the KDI concluded.