Consumption, output see upticks

The Korean economy showed signs of improvement on Thursday when the Ministry of Strategy and Finance released data indicating that consumption is growing and output and investment are improving.

But Asia’s fourth-largest economy still faced external risks, including a slowdown in China’s economic growth and an impending rise in U.S. interest rates, it added.

“Consumption has risen to levels seen before the Middle East respiratory syndrome [MERS] outbreak, and this has helped lift output and investments out of the second-quarter slump,” the Finance Ministry said in its monthly green book.

Service sector output and retail sales were showing visible signs of life, rising for the second consecutive month in August. Service sector output rose 0.4 percent in August month on month, while retail sales increased by 1.9 percent.

Green book data also showed that department store sales rose 14.1 percent in September compared with a year before, while sales at discount chains rose 10 percent.

On the back of government-led campaigns to boost consumer spending, including a consumption tax cut implemented in late August, domestic credit spending rose 14.8 percent year on year, significantly more than the 10.3 percent increase seen in August.

The cut in the consumption tax boosted sales of Korean cars in particular, with their sales rising nearly 16 percent compared with a year ago.

Along with the recovery in consumption, industrial output in August rose 0.4 percent compared with the previous month, firm growth considering the holidays in August.

Gains were led by increases in output of IT products, including phones, whose output rose by 31.1 percent month on month, as well as memory chips (11.6 percent) and electronic parts (5.8 percent), the green book showed.

“September output was closely related to recovering domestic consumption. Auto and IT products were further lifted by new product offerings,” the Finance Ministry said.

The service sector, which was badly affected by MERS in the early summer, sprang back to life in August.

By industry segment, the wholesale and retail sector saw an output increase of 0.5 percent month on month, while food and hospitality output increased 2.3 percent.

Transportation saw a 6 percent increase.

The labor market showed some signs of improvement, with the number of newly employed individuals in August hitting 26.14 million, an increase of 256,000.

Consumer prices remained relatively stable due to continued weakness in energy prices, rising 0.6 percent year on year in September, lower than the 0.7 percent increase seen from June to August.

The prices of crude oil products fell nearly 19 percent year on year, with the average dollar per barrel price of Dubai crude in September at $45.80. The prices of Brent and WTI were $48.60 and $45.50, respectively.

The domestic prices of gasoline and diesel also fell to 1,511.5 won ($1.30) and 1,263.8 won per liter, respectively, down from the previous month’s 1,544.5 won and 1,307.8 won per liter.

The Korea Grand Sale event and increased agricultural output also contributed to price stability, the Finance Ministry said.

“We will make sure that efforts to boost domestic consumption, such as the early injection of stimulus funds and Korea Black Friday, are implemented in a timely fashion,” the Finance Ministry said.

“We will also closely monitor both domestic and international economic trends, as well as the risks, and respond expediently when necessary.”

BY PARK JUNG-YOUN [park.jungyoun@joongang.co.kr]