‘Equipment’ investments fall as exports sink in April

Although certain economic indictors have improved, Korea’s overall growth remains subdued in large part due to falling exports in April that have deterred certain types of investments, the state-run economic think tank the Korea Development Institute (KDI) said on Monday.

“April’s exports recorded a -11.2 percent growth, continuing the contraction of -8.1 percent in the previous month, influenced by sluggishness in most items, excluding vessels,” the KDI said in a report.

Exports to Asean countries increased 7.1 percent, whereas those to China dropped by 18.4 percent and those to Japan fell by 25.5 percent.

“Motor vehicles and parts fell 17.3 percent and flat panel displays dropped 26.3 percent year-on-year in March,” the KDI said. Exports of vessels, on the other hand, rose 25.2 percent.

Meanwhile, seolbi investments, literally “equipment” investments in areas such as industrial and mechanical equipment, fell for the fifth consecutive month and decreased 7.7 percent year-on-year in March. Investment in machinery fell 12.8 percent, while investment in transportation rose 6.4 percent year-on-year.

“The manufacturing industry’s capacity utilization rate continued to stay low at 73.2 percent in March, down from 73.5 percent in the previous month, meaning overall production activity remains dull,” the KDI said.

“Moreover, the domestic machinery orders received, a leading indicator for seolbi investments, slumped with a mere year-on-year growth of 0.2 percent in the first quarter.”

Construction investment, on the other hand, rose 23.3 percent year-on-year in March as both sectors for building construction and civil engineering increased.

Meanwhile, apartment transactions posted a large drop of -38 percent to a record 49,179 units in March from a year ago, according to the KDI. The report showed that the labor market also is still very weak.

“Employment growth rose higher than last month, but the unemployment rate remained high, showing no sign of improvement in overall employment conditions,” the KDI said.

A total of 300,000 people got new jobs in March, up 1.2 percent from the previous year. However, the growth rate has fallen from 1.4 percent in January.

In March, the seasonally-adjusted unemployment rate remained high at 3.8 percent, continuing on last months’ trend at 4.1 percent. Retail sales in March improved somewhat significantly, according to the report.

“March’s retail sales index recorded a high growth of 5.7 percent, largely owing to the increased sales of passenger cars,” the KDI said.

By item, durable goods rose 12.6 percent, helped by increased sales in passenger cars as both local and foreign automakers launched new lineups. Non-durable goods also rose 3.6 percent and semi-durable goods increased by 1.1 percent.

The composite consumer sentiment index rose to 101 in April from 100 in the previous month.

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]