KDI: "Economic Slump Is Gradually Easing"

KDI August Economic Trends
Alleviation of Semiconductor Slump, a Major Cause of Economic Slowdown

The Korea Development Institute (KDI), a government-funded research institute, has diagnosed that the sluggishness of the Korean economy is gradually easing.

In the ‘August Economic Trends’ report published by KDI on the 7th, it stated, “The decline in manufacturing production centered on semiconductors is slowing down, and service sector production continues a moderate upward trend, indicating that the economic downturn is gradually easing.” It is an assessment that signs of economic recovery are emerging, centered on semiconductors, which had been a major cause of the economic slump.

In June, KDI said, “Indicators suggesting the economic bottom are increasing, such as a partial slowdown in the decline of semiconductor export value and volume.” In July, paying attention to the indicator that semiconductor export volume turned to an increase, it stated, “The manufacturing slump centered on semiconductors is partially easing, and the economy is passing the bottom.” This month, KDI went further to diagnose that the economic downturn is easing.

KDI explained, “In particular, indicators suggesting an easing of the semiconductor sector’s slump have increased, such as a reduced decline in semiconductor production and a significant increase in export volume,” and added, “Manufacturing shows signs of easing sluggishness as the inventory ratio has sharply declined.”

The year-on-year decline rate of semiconductor production narrowed from -18.7% in May to -15.9% in June. The export volume index, which indicates changes in semiconductor export volume, decreased by 1.3% in April but then increased by 8.1% in May and surged by 21.6% in June. The manufacturing inventory ratio fell from 122.7% in the previous month to 111.4%.

KDI also stated, “Consumer sentiment index continued its upward trend, and the slump in consumption showed signs of easing, such as a significant increase in retail sales of passenger cars.” The consumer sentiment index in July recorded 103.2, a significant rise compared to 100.7 in the previous month. Due to the increase in imported car purchases following the end of the individual consumption tax reduction, passenger car sales temporarily recorded a high growth rate of 21.2%. Sales volume of imported passenger cars reversed from -14.7% in May to 16.3% in June.

Regarding facility investment, KDI said, “The decline temporarily narrowed mainly in transportation equipment, but demand for facility investment remains limited.” Regarding construction investment, it stated, “Although a high growth rate was maintained due to the base effect, leading indicators such as construction orders (-42.7%) showed a sharp decline, and housing permits and starts were sluggish, suggesting the possibility of a slowdown in construction investment in the future.”

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