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Economy shows signs of rebound, says KDI

May 08,2017
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The latest data on investments and exports show the Korean economy is recovering, but the growth has been limited by weak domestic consumption, a government think tank said Monday.

Overall industrial output rose 4 percent in March compared to a year earlier, according to the Korea Development Institute, largely thanks to boosts in the service sector and insurance. Exports in April jumped 24.2 percent as demand for semiconductors continued to ride high.

“The economy is gradually recovering following improvements in exports and investments,” the institute said in a report. “Demand for semiconductors has increased, and it is having a positive impact on facilities investment and exports.”

According to Statistics Korea, the government’s data agency, facilities investment, including investment in equipment and machinery, rose 12.9 percent in March compared to the previous month. It was the highest growth rate since October 2013, when it rose 14.9 percent.

Exports in April reached $51 billion, the second-highest all-time figure after $51.6 billion recorded in October 2014.

“Exports have improved as it appears the global economy is recovering,” the report said, “and it seems it will remain strong for a period of time.”

By type, semiconductor shipments rose 56.9 percent year on year due to increased demand and higher prices. Exports of ships more than doubled, by 102.9 percent.

Growth in retail and services remained slow as consumer sentiment exhibited only a slight recovery.

The composite consumer sentiment index stood at 101.2 in April, up from 96.7 the previous month. A reading above 100 points indicates the majority of survey participants maintain a positive outlook on the national economy, while a reading below 100 indicates a negative view.

“The index is near the level of last October’s 102 because of growing positive sentiment about economic conditions,” the report said.

Although export and investment indicators show the economy seems to be on the right track, the Korea Development Institute and other think tanks remain cautious about proclaiming a full recovery because of weak domestic consumption.

March retail sales advanced a mere 1.6 percent year on year, continuing the low-growth trend from last month, when they expanded a dismal 0.5 percent.

By product, non-durable goods (products with a shelf life of less than three years, such as food items) swung to an increase of 3.5 percent, while durable goods growth remained low at 0.8 percent. The figure for semi-durable goods like clothing and furniture fell to negative 1.7 percent.

The labor market also improved in March, though the growth was moderate. The number of employees rose 1.8 percent year on year by 466,000, higher than the 1.5 percent, or 371,000 workers, recorded in the previous month. Most of that growth was in services, which saw an increase of 438,000 employees, while the number of workers in manufacturing dropped by 84,000.

“The economy is getting better, but there still are various uncertainties, such as rising protectionism in the United States and the deployment of Thaad,” said Ahn Hyung-joon, a director at Statistics Korea, referring to the Terminal High Altitude Area Defense, a U.S. missile shield in Korea that has sparked a consumer boycott in China. “The government needs to monitor these factors closely.”

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]