KDI "Household and Individual Business Debt Burden Increases... Domestic Demand Recovery Not Seen"

June Economic Trends

According to a national research institute's analysis, the economy is somewhat improving due to a high export growth rate, but domestic demand is not showing signs of recovery. It was also analyzed that the delinquency rate is rapidly increasing as the burden of debt repayment is intensifying, especially for individual business owners, due to prolonged high interest rates.

In the 'June Economic Trends' report released on the 11th by the Korea Development Institute (KDI), it was evaluated that "exports continue to show a favorable recovery centered on semiconductors, but domestic demand has not materialized a recovery as the high interest rate trend is maintained."

Exports in May (11.7%) showed a high growth rate in IT items such as semiconductors, continuing a positive trend for eight consecutive months. On a daily average basis, automobile exports (2.4%) saw a reduced growth rate due to temporary factors such as partial production facility maintenance and base effects, but the high growth rate of IT items (40.8%) continued.

On the other hand, the high interest rate trend is acting as a major factor in domestic demand sluggishness, as delinquency rates on loans for households and individual business owners continue to rise.

KDI analyzed, "With the continuation of the high interest rate trend, the burden of debt repayment is intensifying mainly for individual business owners," adding, "Both the delinquency rate for individual business owners (0.57%) and the delinquency rate for household loans (0.39%) continue to rise above the long-term average."

Retail sales and facility investment continued to decline, and construction investment showed only a slight increase. Retail sales closely related to goods consumption (-2.6%) continued to decline, and even on a seasonally adjusted month-on-month basis, it decreased by 1.2%, showing a sluggish trend.

By business type, despite the high growth rate of non-store retail sales (9.0%), which reflects online sales, most offline sales such as department stores (-9.9%), specialty stores (-6.4%), and large discount stores (-6.0%) showed sluggish performance.

Facility investment (-2.3%) continued its decline from the previous month. Construction output (constant) recorded a low growth rate of 0.8%, showing sluggishness, and leading indicators such as housing permits and construction orders remained at low levels, suggesting that the slowdown in construction investment will continue for the time being.