Government Sees Economic Recovery Shift from 'Signs' to 'Trend'... Construction Investment Slump Becomes 'Visible'

The government has changed its assessment of economic recovery from a 'sign' level to a 'trend' level. This is due to improvements not only in exports but also in manufacturing production indicators. However, it maintained the perception that there are still differences in the pace of recovery, such as the visible sluggishness in construction investment and the slowdown in private consumption.

The Ministry of Economy and Finance evaluated in the 'February Recent Economic Trends (Green Book)' published on the 16th that "amid a slowdown in inflation, the economic recovery trend centered on manufacturing production and exports continues." Kim Gwi-beom, head of the Economic Analysis Division at the Ministry, explained, "It is true that exports continue to rise, and manufacturing production shows signs of rising from the bottom for three consecutive months in the mining and manufacturing sectors. Also, the number of manufacturing workers has turned to an upward trend, so we have 'toned up' the economic assessment focusing on manufacturing and exports."

The government had maintained the view of 'signs of economic recovery' for three consecutive months from November last year to January this year, but this month it made a more advanced evaluation by describing it as an 'economic recovery trend' for the first time. This trend is driven by exports and manufacturing production centered on semiconductors. Last month, exports increased by 18.0% compared to the same month last year, with exports rising in 13 out of 15 major export items, including ships (76%), semiconductors (56%), computers (37%), automobiles (25%), and general machinery (15%). The goods balance has maintained a surplus for nine consecutive months, supported by a trade surplus. In December, mining and manufacturing production increased, leading to a 0.6% rise compared to the previous month, continuing a three-month upward trend, and manufacturing shipments increased by 3.2% compared to the previous month.

Employment levels are also solid. Last month, the number of employed persons was 28.815 million, an increase of 380,000 compared to the same month last year, and the employment rate of the economically active population (ages 15-64) reached 68.7%, the highest level ever recorded since statistics began. The number of employed persons increased across manufacturing, construction, and service sectors.

However, the government diagnosed that there are differences in the pace of recovery across economic sectors, such as a slowdown in private consumption and visible sluggishness in construction investment. Private consumption in the fourth quarter of last year increased by only 0.2% compared to the previous quarter, and retail sales in December last year decreased by 0.8% month-on-month and 2.2% year-on-year, with durable goods, semi-durable goods, and non-durable goods all declining. Construction investment in the fourth quarter of last year also decreased by 4.2% quarter-on-quarter and 1.6% year-on-year.

While the inflation rate slowed from the 3% range to 2%, prices of agricultural, livestock, and fishery products, which have a significant impact on the livelihoods of ordinary people, remain strong. Last month, inflation rose by 2.8% year-on-year, falling into the 2% range. However, agricultural, livestock, and fishery products rose by 8.0% year-on-year due to continued strong fruit prices and price increases in some vegetables caused by cold waves and insufficient sunlight.

The global economy appears to be increasingly expected to achieve a soft landing, but uncertainties persist. The U.S. economy continues to show a favorable employment trend, but inflation is slowing more slowly than expected, and consumption is weakening. The Chinese economy achieved its annual growth target last year, but uncertainties remain due to sluggish real estate investment and falling consumer prices. International oil prices are rising due to geopolitical instability in the Middle East and disruptions in U.S. crude oil production.

The Ministry of Economy and Finance stated, "We will prioritize the rapid establishment of a price stabilization policy and the spread of recovery to vulnerable sectors of livelihoods and domestic demand," adding, "While swiftly promoting key policy tasks from the Livelihood Forum, we will simultaneously manage potential risks thoroughly and strive to enhance the dynamism of our economy."