Conflicting Domestic Demand and Employment Indicators... 'Uncertainty Continues' for Two Months in the Greenbook (Comprehensive)

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[Sejong=Asia Economy Reporter Joo Sang-don] Despite improvements in domestic demand indicators such as industrial production, consumption, and investment, the employment situation is showing severe weakness, increasing the government's concerns about economic assessment. Reflecting this, the Ministry of Economy and Finance's November issue of the Recent Economic Trends (Green Book) featured the phrase "continued uncertainty" for the second consecutive month. Regarding external economic conditions, it simultaneously expressed concerns about delayed global economic recovery due to the continued spread of COVID-19 and strengthened lockdown measures in major countries, as well as optimism stemming from vaccine development.

On the 13th, the Ministry of Economy and Finance published the November Recent Economic Trends report containing these details.

Kim Young-hoon, head of the Economic Analysis Division at the Ministry of Economy and Finance, stated in a comprehensive evaluation, "Recently, our economy has maintained a moderate export recovery trend, and manufacturing, consumption, and investment have improved," but added, "Recovery in the service sector and employment indicators remains constrained, and uncertainty in the real economy continues due to the global spread of COVID-19."

Exports in October recorded $44.98 billion, down 3.6% compared to the same period last year. However, considering two fewer working days, daily average exports increased by 5.6%, marking a positive growth for the first time in nine months. The three major indicators of industrial activity in September?production, consumption, and investment?showed a 'triple increase' for the first time in three months since June. Total industrial production rose 2.3% from the previous month, retail sales increased by 1.7%, and facility investment grew by 7.4%.

On the other hand, difficulties in the employment market intensified. The number of employed persons in October decreased by 421,000 compared to the same month last year, marking the eighth consecutive month of decline. The decrease in employment in October was the largest since the spread of COVID-19. Notably, the unemployment rate surged to 3.7%, the highest in 21 years since October 1999 (5.0%). However, Kim emphasized, "While employment indicators have recently shown stronger contemporaneous correlation, it is traditionally appropriate to view them as typical lagging indicators." In other words, it is difficult to use employment indicators to predict future economic conditions.

Although positive and negative factors coexist in this situation, the Ministry of Economy and Finance cautiously forecasted the dominance of positive factors.

Kim said, "Because volatility is severe depending on the spread of COVID-19, making forecasts at this point may be meaningless," but added, "Looking only at the indicators, exports were in a favorable state in early November, and although domestic demand was stagnant in the third quarter due to the resurgence of COVID-19 in August, it is gradually recovering." Indeed, the consumer sentiment index (CSI), a leading economic indicator, rose by 12.2 points from the previous month to 91.6 in October. The business sentiment index (BSI) for manufacturing companies also improved, with October's actual performance at 79, up 11 points from the previous month, and the November outlook at 76, up 8 points.

Expectations and concerns were mixed regarding the external economy. Kim stated, "Externally, concerns about delayed global economic recovery are expanding due to the continued spread of COVID-19 in major countries and strengthened lockdown measures, which have weakened improvements in real economic indicators. However, optimism about recent vaccine developments is also spreading."

In the United States, third-quarter gross domestic product (GDP) increased sharply due to base effects and the resumption of economic activities. However, major real economic indicators showed mixed trends, with industrial production turning negative in September. In China, consumption growth expanded alongside increases in investment and exports, resulting in a higher GDP growth rate in the third quarter compared to the previous quarter. In Japan, industrial production increased in September, but retail sales turned downward, and the manufacturing Purchasing Managers' Index (PMI) remained below the baseline of 50, indicating a somewhat delayed recovery. The Eurozone's third-quarter growth rate rose by 12.7% quarter-on-quarter due to the resumption of economic activities, but recovery has stalled as retail sales declined amid renewed COVID-19 outbreaks and strengthened containment measures.

Kim concluded, "The government will thoroughly implement quarantine measures while strengthening comprehensive policy efforts, including fiscal and investment execution management, revitalization of domestic demand, and maintaining export competitiveness."

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