The Korean economy slowed the pace of recovery in July and August as policy measureswhich boosted the economy in the first half became less influential. However, in Septemberthe economic indicators improved, in particular those related to exports.In August, mining and manufacturing production rose 1.2 percent year-on-year, posting anincrease for the second consecutive month, while the month-on-month indicator fell 1.3percent, affected by summer vacations. Service output also decreased 0.6 percent month-on-month, but on a year-on-year basis, it gained 1.1 percent, registering an increase for thefifth month in a row.Consumer goods sales fell 0.3 percent month-on-month in August, due to a drop in durablegoods sales including automobile sales, whereas year-on-year consumer goods sales gained2.0 percent, rising for four straight months.Facilities investment continued to drop year-on-year in August, tumbling 16.6 percent, whilethe indicator gained 2.8 percent month-on-month, positively affected by machineryinvestment. Construction completed slid 4.4 percent month-on-month, or 6.8 percent year-on-year, due to poor performance in the private sector.Exports in September sharply slowed its year-on-year fall from 20.9 percent a month ago to6.6 percent, as major exports such as semiconductors and automobiles continued toimprove, and the number of working days increased.The total number of workers hired gained 3,000 in August, shifting to a rise from theprevious month’s loss of 76,000, thanks to government’s job creating measures, whileunemployment stayed at the previous month’s level of 3.7 percent. Year-on-year consumer prices in September stayed at the similar level to the previousmonth, rising 2.2 percent year-on-year, as stabilizing agriculture, livestock & marine productprices offset an increase in petroleum prices.In September volatility in domestic financial markets grew as capital inflows from abroadincreased, which affected stock prices, interest rates, and foreign exchange rates.To sum up, although the domestic economy improves steadily, the private sector still showsweak recovery and downside risks including a possible delay in global economic turnaroundexist.The Korean government will keep pursuing expansionary fiscal policies, while making up forthe decreased second half fiscal capabilities by minimizing the 2009 budget transferred to2010 or left unspent and expanding public firms’ investment, as uncertainties surroundingthe economic situation remain. On the other hand, measures to create jobs, support theworking class, and boost consumption and investment will be carried out as planned, alongwith close monitoring of the economy to detect any signs of instability, in particular theoverheated real estate market.
The Green Book
Current Economic Trends