Domestic Consumption Revives Slightly... Semiconductor and Exports Still 'Dark'

KDI Economic Trends

Busan Port Area [Image Source=Yonhap News]

As sluggish domestic demand somewhat revived, an analysis suggested that the rapid downturn of the Korean economy has eased. However, the economy still remains sluggish due to the downturn in the semiconductor industry and worsening exports.

According to the economic trends report by the Korea Development Institute (KDI) on the 8th, retail sales in March recorded a growth rate of 0.5%, similar to the previous month. In particular, durable goods saw an expanded increase from 0.6% to 3.3%, driven by a 14.5% rise in passenger car sales. Semi-durable goods also showed an upward trend, mainly in clothing (10.8%). Although non-durable goods saw a larger decline centered on food and beverages, cosmetics, and pharmaceuticals, adjusting for seasonal factors showed a 0.7% increase compared to the previous month. Supported by this, the consumer sentiment index rose from 92.0 last month to 95.1.

However, exports continued to sharply decline, centered on semiconductors, due to unfavorable external conditions. The decline in manufacturing production also persisted. Total industrial production in March increased by only 2.2%, lower than the previous month’s 3.3%. Despite a strong increase in automobiles due to the normalization of vehicle parts supply, mining and manufacturing production recorded a negative growth of -7.6%. This is attributed to the impact of semiconductors (-26.8%) and electronic components (-30.4%). KDI analyzed, “With the contraction of external demand centered on semiconductors, export decline continues, and the business sentiment index remains at a low level, indicating ongoing economic sluggishness,” adding, “External conditions have worsened as global trade volume slows and the global manufacturing sentiment index declines.”

Exports also showed a sluggish trend as the global economic slowdown continued. Last month’s exports decreased significantly by -14.2%, following -13.6% in the previous month. By item, automobiles (40.3%) and highly volatile ships (59.2%) saw large increases, but most other sectors, especially ICT (-42.5%), recorded poor performance. By country, exports to China continued a sharp decline, and exports to other regions were also sluggish.

Regarding inflation indicators, consumer prices rose by 3.7%, lower than the previous month’s 4.2%. This was due to a weakening of supply-side price pressures, which slowed the rise in consumer prices. On the other hand, core inflation (excluding food and energy) remained around 4.0% as demand pressures persisted.

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