KDI Diagnoses "Delayed Domestic Demand Recovery... Continued Constraints on Economic Improvement"

Korea Development Institute Announces 'October Economic Trends'

The Korea Development Institute (KDI), a government-funded research institute, diagnosed on the 10th that "economic improvement is being constrained as domestic demand recovery is delayed, centered on construction investment." This assessment indicates that domestic demand has been sluggish for 11 consecutive months.

In the 'October Economic Trends' report released that day, KDI explained, "While ICT exports continued a strong growth trend and manufacturing production recovered from a temporary adjustment, the recovery trend persisted," adding, "However, domestic demand recovery appears delayed as construction investment remains sluggish amid weak goods consumption."

It continued, "The decline in construction performance continued," and evaluated, "Considering the accumulated weakness in leading indicators, construction investment is likely to remain sluggish for the time being." It also added, "While service consumption growth continued, retail sales decline persisted due to the high-interest rate environment."

Earlier, in last month's economic trends, KDI assessed that "despite strong export growth, economic improvement has been somewhat delayed as domestic demand has not recovered." Furthermore, it stated, "Economic improvement is constrained as domestic demand recovery is delayed due to the high-interest rate environment," offering a diagnosis similar to this month’s.

Goods consumption continued to decline across most categories. In the case of service consumption, a moderate increase was observed as the slump in accommodation and food services eased. Last month, the Consumer Sentiment Index recorded 100.0, slightly down from the previous month’s 100.8, mainly due to declines in economic-related items such as current economic conditions (73→71) and future economic outlook (81→79).

Facility investment recorded a high growth rate, centered on transportation equipment. However, machinery showed a low growth rate due to the continued high-interest rate environment. KDI explained, "Facility investment was influenced by a base effect following a sharp decline of -14.3% in August last year," adding, "Highly volatile transportation equipment such as aircraft saw a significant increase, resulting in a high growth rate."

Exports maintained a favorable trend, supported by strong growth in ICT items. Imports grew by 2.2%, lower than the previous month’s 6.0%, as major energy resources decreased. The trade balance continued its surplus trend, increasing from $3.77 billion to $6.66 billion.

KDI explained, "While the inflation slowdown trend was maintained, consumer price inflation fell sharply due to the decline in international oil prices." However, it added, "Uncertainty over international oil prices has expanded recently due to escalating geopolitical conflicts in the Middle East."

Regarding the global economy, KDI’s assessment is that "moderate growth is being maintained as inflation slows and policy interest rate cuts continue." However, it reiterated the Middle East risk, noting, "Uncertainty persists due to heightened geopolitical tensions."