Seoul: South Korea's economy continues to face "concerns" due to a delayed recovery in construction investment and slowing exports, but there are some positive signs, including improved consumer sentiment, the finance ministry said Thursday.
According to Yonhap News Agency, in its latest monthly economic assessment, known as the Green Book, the Ministry of Economy and Finance highlighted ongoing concerns-the delay in the recovery of construction investment, employment difficulties in vulnerable sectors, and a slowdown in exports due to U.S. tariff measures.
However, the ministry omitted references to "downside risks" that had been mentioned in its previous reports for seven consecutive months, while mentioning "positive signs" for the second straight month. Notably, it marked the first time in nearly two years that the report used optimistic language when referring to consumer spending or domestic demand. In June, retail sales, a gauge of private spending, gained 0.5 percent on-month, backed by strong demand for clothing and cosmetics.
Retail sales of semidurable goods, such as apparel, rose 4.1 percent, while nondurable goods, including cosmetics, gained 0.3 percent. In contrast, sales of durable goods, such as home appliances, fell 1.6 percent. The ministry noted that improved retail sales showed positive signs, citing an increase in consumer sentiment and a rise in domestic credit card transactions, yet also warned that the slowing growth in passenger car sales could act as a negative factor in the coming months.
In July, the amount of domestic credit card approvals rose 6.3 percent from a year earlier, the highest on-year growth since February, when it gained 6.8 percent. The pace of growth also accelerated from the previous month's 3.7 percent gain. To stimulate domestic demand, the ministry said the government will expedite the implementation of a supplementary budget, which includes cash handouts referred to as "consumption coupons." The first batch of those coupons was issued in late July.
In June, industrial production inched up while facility investment weakened across most sectors, with the exception of machinery used in semiconductor manufacturing. Meanwhile, the labor market continued to show some resilience, with more than 170,000 jobs added in July, the report noted. However, job losses persisted in the manufacturing and construction sectors, while youth employment remained sluggish.
Exports rebounded in July, rising 5.9 percent from a year earlier to US$60.8 billion on the back of robust global demand for semiconductors, despite the U.S. tariff scheme, it said. Nonetheless, concerns remain over a continued slowdown in the construction investment and uncertainty surrounding U.S. tariff policies.
"There is still uncertainty over how tariffs will affect outbound shipments of semiconductors, pharmaceuticals and other key items," a ministry official said. The official, however, said signs of a pickup in construction orders are expected to help investment in the sector toward the second half of the year.