Government Cites "Domestic Demand Improvement Trend"...Mentions 'Inflation Concerns' for 4 Consecutive Months

Ministry of Economy and Finance Publishes 'June Recent Economic Trends'

[Sejong=Asia Economy Reporter Son Seonhee] The government recently assessed the economic situation, stating that the domestic demand improvement trend continues. However, concerns about inflation due to external conditions have been mentioned for four consecutive months since March.

On the 11th, the Ministry of Economy and Finance stated in the recently published Economic Trends (Green Book June issue), "Exports and investments continue a steady recovery, domestic demand improvement trend continues, and employment increased significantly for two consecutive months," adding, "Globally, major countries' growth forecasts have been revised upward due to vaccine and policy effects, but concerns about inflation persist due to rising raw material prices."

Since the spread of the COVID-19 pandemic, domestic demand experienced severe stagnation. The easing of domestic demand sluggishness was first mentioned in March, followed by a "gradual improvement trend" in April, and this trend continued in May, according to the analysis.

This is attributed to recent positive trends in indicators such as production, consumption, and investment, as well as the employment market showing an increase of over 600,000 employed persons for two consecutive months in April and May.

In May, card approval amounts increased by 6.8% compared to the same month last year, marking four consecutive months of growth since February. However, the increase was smaller compared to the double-digit growth rates seen in March and April.

Department store sales also rose by 17.3% during the same period, marking four consecutive months of growth. Discount store sales, which recorded -2.0% in the previous month, turned positive with a 6.8% increase in May.

The Consumer Sentiment Index (CSI) for May rose 3.0 points from the previous month (102.2) to 105.2, exceeding the baseline (100) for three consecutive months. A CSI above 100 indicates optimistic consumer sentiment.

The consumer price inflation rate (year-on-year) increased from 2.3% in April to 2.6% in May, reflecting a rise in petroleum prices due to international oil price increases. Given that the average inflation rate from January to May was 1.62%, the first half average inflation rate is expected to approach the government's annual inflation management target of 2% after June.

In particular, the "core inflation," which excludes supply-side volatility factors such as petroleum and agricultural products to show the underlying price trend, rose 1.5% compared to May last year. This is the highest level since September 2019 (1.6%).

Kim Young-hoon, head of the Economic Analysis Division at the Ministry of Economy and Finance, explained in a briefing, "Looking at the rise in international raw material prices, one notable situation in the past month is the increase in raw material prices," adding, "International oil prices have rapidly risen, surpassing $70 per barrel." However, he noted, "There are differing predictions on whether prices will rise further," and "Experts generally believe this is near the peak," concluding, "We need to monitor the situation further."

He also stated, "While focusing on managing domestic and external risks and advancing immediate policy tasks, we will concentrate policy capabilities on preparing the economic policy direction for the second half of the year and the second supplementary budget to solidify the economic recovery trend and strengthen support for job creation and livelihood recovery."

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