KDI Mentions 'Economic Slowdown Easing' After 10 Months... Investment and Manufacturing Remain Weak

[Asia Economy Reporter Kim Hyunjung] The Korea Development Institute (KDI) has hinted at the possibility of a moderation in the domestic economic downturn. After diagnosing the domestic economic situation as 'sluggish' in its economic trend reports from April last year until the end of the year, it mentioned the possibility of recovery for the first time in 10 months.

On the 9th, KDI stated in the 'Economic Trends January Issue' that "some indicators suggest the possibility of a moderation in the economic downturn." From November 2018 to March last year, KDI described the domestic economic situation as 'slowing down,' and from April last year, it judged the economy to be 'sluggish' for nine consecutive months. However, with the expansion of retail sales and service production growth in November, along with a rise in the economic sentiment index, it sees a gradual easing of the economic downturn going forward.

In particular, total industrial production in November shifted from a decrease of -0.2% in the previous month to an increase of 1.2%. This was due to the semiconductor sector's growth rate expanding from 11.7% in the previous month to 30.9%, reducing the decline in manufacturing production from -2.1% to -0.3%, and the increase in service production growth from 0.8% to 2.5%. Domestic machinery orders and construction orders also saw significant increases, and with the rise in the economic sentiment index, expectations for a moderation of the economic downturn are growing.

However, KDI diagnosed that sluggishness in investment and the manufacturing sector continues. The facility investment index in November recorded a 0.0% growth rate, higher than the previous month's -3.6%, but excluding the highly volatile shipbuilding and aircraft sectors, facility investment was -2.3%, showing a similar trend to the previous month (-2.5%). Construction performance (constant prices) recorded a growth rate of -4.7%, following -3.7% in the previous month, due to weakness in the housing sector despite growth in civil engineering. KDI explained, "Facility investment remained flat despite temporary factors such as aircraft investment and base effects, and construction investment is also shrinking, mainly in the building sector."

In manufacturing, shipments saw a slight increase in the decline of domestic demand from -3.6% to -4.1%, but exports narrowed their decline from -2.1% to 1.2%. However, the manufacturing inventory ratio remained high at 116.3%, following 115.6% in the previous month, and the average operating rate fell to 71.8%, lower than the previous month's 73.3%.

Furthermore, it was judged that economic recovery has not yet visibly appeared. The coincident index cyclical component, which shows the current economy, recorded 99.3 in November, down 0.1 percentage points from the previous month. The leading index cyclical component, which predicts future economic conditions, rose 0.4 percentage points from the previous month to 99.2.

This content was produced with the assistance of AI translation services.