KDI "Impact of Global Economic Slowdown... Expanding Downward Pressure on the Economy"

September Economic Trends

[Asia Economy Sejong=Reporter Son Seonhee] The Korea Development Institute (KDI) has diagnosed that the Korean economy is also experiencing increased downward pressure due to domestic and international interest rate hikes and the global economic slowdown, including in China. In particular, the manufacturing sector, including the semiconductor industry that has led Korea's economic growth, is shrinking, affecting the overall economy.

On the 7th, KDI published the 'September Economic Trends' report, stating, "Recently, despite improvements in the service sector, the weakening of external demand has led to a slowdown in the economic recovery."

KDI analyzed, "As the impact of the global economic slowdown spreads, downward pressure on the economy has increased, centered on manufacturing. Facility investment and retail sales have shown a declining trend, and exports, mainly to China and the IT sector, have also seen a reduced growth rate." Furthermore, it observed, "With the ongoing trend of domestic and international interest rate hikes and lockdown measures imposed in major Chinese cities, downward pressure on the economy has intensified."

In July, total industrial production increased by 3.8%, higher than the previous month (2.2%) due to an increase in working days, but it decreased by 0.1% compared to the previous month (seasonally adjusted).

In particular, KDI analyzed that the manufacturing sector is gradually showing the effects of demand slowdown, as inventory ratio (124.2%→125.5%) remains high and the average operating rate (76.4%→75.2%) declines. While logistics disruptions that occurred in June eased, automobile shipments (10.7%) rebounded compared to the previous month (seasonally adjusted), but semiconductor shipments, a key export item, sharply decreased (-26.1%) due to demand slowdown, and inventories surged (12.3%).

The leading index cyclical component, a major indicator used for economic outlook, also fell from 99.7 to 99.4 compared to the previous month, reinforcing concerns about economic contraction.

However, regarding the domestic economy, KDI gave a positive assessment, stating, "The recovery in the service sector, centered on face-to-face industries, continues, and employment shows a strong increase, indicating a favorable employment trend." KDI added, "Despite the resurgence of COVID-19, production in face-to-face sectors such as accommodation and food services, arts, sports, and leisure-related services increased significantly," and "With high employment rates, economic activity participation rates, and low unemployment rates continuing, the labor market has maintained a solid recovery."

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