KDI "Economic Recovery Weakens... Export Slowdown, Inflation Rate Expands"

June KDI Economic Trends

On the 5th, citizens are shopping at a large supermarket in Seoul. Photo by Hyunmin Kim kimhyun81@

The Korea Development Institute (KDI) explained in the June issue of 'KDI Economic Trends' released on the 9th that "the global supply chain disruption and the sharp rise in raw material prices are weakening the economic recovery," and "inflation has also significantly accelerated."

According to KDI, in the case of the service sector, recovery is being seen mainly in face-to-face industries as COVID-19 social distancing measures have been lifted, but manufacturing is contracting, limiting the economic recovery.

Service production (3.7%→5.1%) greatly expanded, centered on accommodation and food services (17.1%), transportation and warehousing (8.7%), and wholesale and retail trade (2.9%), while construction (-5.2%→-1.1%) saw a reduced rate of decline. Public administration (5.3%→9.7%) also continued its growth trend.

On the other hand, manufacturing shipments (0.1%) remained at a low growth rate similar to the previous month, with the average operating rate (78.3%→77.0%) declining and inventory ratio (114.4%→117.2%) rising.

April facility investment recorded a growth rate of -11.9%, lower than the previous month (-5.3%). Machinery (-3.9%→-11.9%), general machinery (-5.4%→-18.7%), and semiconductor-related special industrial machinery (-9.4%→-22.1%) all saw increased declines.

Construction investment also turned to a 0.3% increase as the civil engineering sector improved from the previous month (-9.5%), but the high rise in construction costs persisted, resulting in a reduced decline rate of -1.1% compared to the previous month (-5.2%).

Exports slowed due to worsening external conditions such as China's lockdown measures.

May exports recorded a growth rate of 21.3%, higher than the previous month (12.9%), but excluding the effect of working days (-0.5 days→+2 days), the daily average growth rate narrowed.

Imports showed a high growth rate maintained in major energy sources (80.7%→76.1%), while the growth rate in other sectors (4.2%→20.8%) expanded, resulting in a higher growth rate of 32.0% compared to the previous month (18.6%).

Accordingly, the terms of trade in April worsened to a rise of -11.1%, compared to the previous month (-6.1%), and the trade balance in May recorded a deficit of 1.71 billion dollars following the previous month’s (-2.51 billion dollars) deficit.

In May, consumer prices rose by 5.4%, higher than the previous month (4.8%), as petroleum prices continued to rise and the increase in prices of livestock products and electricity, water, and gas expanded.

The financial market is also showing instability due to uncertainties in domestic and international monetary policies.

The won-dollar exchange rate was 1,237.2 won at the end of May, lower than the end of the previous month (1,255.9 won), but as of the 7th of this month, it rose to 1,257.7 won, showing high volatility.

The composite stock price index recorded 2,626.3 as of the 7th, down from 2,695.1 at the end of April, and bank corporate loans in April expanded to 12.1 trillion won, increasing from 8.6 trillion won in the previous month.

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