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Economic Bulletin (Vol. 32 No.10)

Economic Bulletin (Vol. 32 No.10)

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-The Green Book: Current Economic Trends
-Policy Issues
-Economic News Briefing
-Statistical Appendices
-The Green Book: Current Economic Trends
-Policy Issues
-Economic News Briefing
-Statistical Appendices

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Published by: Republic of Korea (Korea.net) on Oct 19, 2010
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11/04/2011

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The cyclical indicator of coincident composite index decreased 0.1 point month-on-month to

post 102.1 in August.

Among the components of coincident composite index, four components such as the service

activity index and the value of construction completed went down while the other four

components such as the domestic shipment index and the wholesale & retail sales index

were up.

Components of coincident composite index in August (m-o-m)

Value of construction completed (-0.9%), service activity index (-0.5%), manufacturing operation ratio index
(-0.4%), number of non-farm payroll employment (-0.1%), wholesale & retail sales index (1.5%), volume of
imports (1.3%), domestic shipment index (1.2%), mining & manufacturing production index (0.5%).

The year-on-year leading composite index in August increased 0.2 percentage points from

the previous month showing a fourth consecutive month upward trend of the economy but

decreased by 0.8 percentage points year-on-year due to last year’s high base effect.

Among the components of the leading composite index, five components such as the value

of construction orders and the indicator of inventory cycle declined, while the other five

components such as the ratio of job openings to job seekers and the composite stock price

index climbed.

Components of the leading composite index in August (m-o-m)

Value of construction orders received (-13.1%), value of machinery orders received (-5.5%), indicator of
inventory cycle (-2.8%p), consumer expectations index (-0.5p), spreads between long & short term interest
rates (-0.1%p), ratio of job openings to job seekers (3.1%p), composite stock price index (3.1%), value of
capital goods imports (2.4%), net terms of trade index (1.4%), liquidity in the financial institutions (0.3%).

Feb

Mar

Apr

May

Jun1

Jul1

Aug1

Coincident composite index (m-o-m, %)

1.2

0.9

0.9

0.7

0.8

0.9

0.3

Cyclical indicator of coincident composite index

100.0

100.6

101.1

101.4

101.7

102.2

102.1

(m-o-m, p)

0.7

0.6

0.5

0.3

0.3

0.5

-0.1

Leading composite index (m-o-m, %)

-0.2

0.2

-0.2

0.6

0.3

0.9

0.2

12 month smoothed change

10.3

9.7

8.6

7.9

7.1

6.7

5.9

in leading composite index (%)

(m-o-m, %p)

-1.0

-0.6

-1.1

-0.6

-0.9

-0.4

-0.8

1. Preliminary

2010

1. Preliminary

Economic Bulletin 41

Coincident and leading composite indices

Source: Statistics Korea

13-1

13-2

13-3

Cyclical indicator of coincident composite index

Source: Statistics Korea

Leading composite index

Source: Statistics Korea

Background

During the past two years, the Korean government has put the first priority on riding out the

economic crisis. The administration actively responded to the crisis, as it laid out 40.6 trillion

won in fiscal spending through supplementary budgets and put 26.1 trillion won in tax

reduction, the total of which amounted to 66.7 trillion won or 6.5 percent of GDP, between

2008 and 2010. Helped by the government’s swift response, Korea has seen its economy

recover faster than any other OECD member countries. Against this backdrop, the Korean

government unveiled the 2011 budget plan focusing on 1) expediting the trickle-down of the

economic recovery to the real economy, and 2) improving fiscal consolidation impaired while

the country was trying to overcome the crisis.

Key principles of the 2011 budget plan

The 2011 budget will prioritize 1) supporting working class people through welfare services

designed to the need of individuals in education, daycare, housing and medical services, 2)

nurturing future growth engines such as green technologies, convergence industries and

other breakthrough technologies by providing more systematic support in developing core

technologies, growing professionals, creating new markets, and funding startups, and 3)

improving the fiscal balance so that it will reach a balance between 2013 and 2014 and the

national debt will be reduced to the lower 30 percent range to GDP by 2014.

42October 2010

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