Construction Investment Turns Positive
Government Consumption and Exports Also Increase
In the third quarter, South Korea's economy grew by 1.3% compared to the previous quarter. This figure is 0.1 percentage points higher than the preliminary estimate announced in October, as construction investment turned positive and both government consumption and export performance were revised upward.
The Bank of Korea announced on December 3 that the country's real gross domestic product (GDP) growth rate (provisional) for the third quarter increased by 1.3% from the previous quarter.
After contracting by 0.2% in the second quarter of last year, the South Korean economy recorded only 0.1% growth for three consecutive quarters (the third and fourth quarters of last year and the first quarter of this year), with another negative growth rate of -0.2% in the first quarter of this year. However, it rebounded to 0.7% in the second quarter and reached the 1% range in the third quarter.
In the third quarter, both domestic demand-including consumption and construction investment-and exports increased.
By expenditure category, private consumption rose by 1.3% from the previous quarter, as spending on goods such as passenger cars and communication devices, as well as services such as restaurants and medical care, all increased. Government consumption also grew by 1.3%, mainly due to higher expenditures on goods and health insurance benefits.
Construction investment increased by 0.6%, led by civil engineering projects. This marks the first turnaround in six quarters and is higher than the preliminary figure of -0.1% announced in October. Facility investment rose by 2.6%, mainly due to increased investment in machinery such as semiconductor manufacturing equipment.
Exports increased by 2.1%, driven by semiconductors and automobiles, while imports grew by 2.0%, mainly due to machinery, equipment, and automobiles.
Compared to the preliminary figures, all categories were revised upward: government consumption (by 0.1 percentage points), construction investment (by 0.7 percentage points), facility investment (by 0.2 percentage points), intellectual property product investment (by 1.0 percentage points), exports (by 0.6 percentage points), and imports (by 0.7 percentage points).
Looking at the contribution to third-quarter growth by expenditure category, domestic demand-including consumption and investment-contributed 1.2 percentage points, while net exports (exports minus imports) contributed 0.1 percentage points. Compared to the second quarter, domestic demand rose by 0.8 percentage points, while net exports fell by 0.2 percentage points, indicating a clear recovery in domestic demand.
By item, consumption contributed 0.9 percentage points, while construction investment and facility investment each turned positive, contributing 0.1 percentage points and 0.2 percentage points, respectively. Exports contributed 0.9 percentage points and imports 0.8 percentage points.
By industry, manufacturing increased by 1.5% from the previous quarter, led by transportation equipment, computers, and electronic and optical devices. The construction sector grew by 0.7%, mainly due to civil engineering. The service sector increased by 1.4%, driven by wholesale and retail, accommodation and food services, transportation, and finance and insurance.
In the third quarter, real gross national income (GNI) increased by 0.8% compared to the previous quarter. Due to deteriorating terms of trade, real trade losses expanded, and real net factor income from abroad decreased, resulting in GNI growth lagging behind GDP growth. Real GNI reflects the real purchasing power earned by Korean nationals both domestically and abroad. An increase in real GNI indicates that the economic capacity of the population has improved.
The GDP deflator, which reflects the overall price level in the domestic economy, rose by 2.7% year-on-year. In the second quarter, the gross national savings rate fell by 1.2 percentage points from the previous quarter to 34.4%, while the gross domestic investment rate declined by 0.2 percentage points to 28.6%.
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