Economy still tepid, says KDI

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Economy still tepid, says KDI

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A state-run think tank warned that the economy is still tepid, saying exports and domestic demand continue to be sluggish.

The Korea Development Institute (KDI) said exports were hit by the withdrawal of Samsung’s Note7 phablet and the barely growing global economy.

Retail sales and services grew less, implying a gradual slowdown of overall economic activity.

“Construction investment grew less due to the base effect but maintained a favorable upward trend, offsetting the slump in other sectors,” said the KDI in a monthly report.

“Retail sales grew less mainly in durable goods such as motor vehicles and communication devices while facilities investment shrank, particularly in transport equipment.”

Retail sales in September rose merely 0.5 percent year on year, down from last month’s 6.1 percent, as sales of durable goods fell and those of semi and non-durable goods grew less than in the previous month.

By item, durable goods fell 3 percent year on year due to reduced demand for motor vehicles and communication devices.

Semi- and non-durable goods recorded growth rates of 1.9 percent each.

Facilities investment, or investments in equipment and machinery, fell 4.2 percent year on year, reversing last month’s increase of 2.9 percent, mainly due to a large decrease in transport equipment.

“Transport equipment investments fell 24.6 percent year on year and the decrease was mainly driven by the decline in other transport equipment such as ship and marine structure and parts,” said the KDI.

The manufacturing sector’s capacity utilization rate fell to 70 percent.

Exports for most key products remained dull with a larger decline in automobiles, the report said.

In October, exports fell 3.2 percent year on year, and the figure for motor vehicles and wireless communication devices dropped 11.8 percent and 28.1 percent respectively.

Construction investment also remained weak in September. The value of construction orders completed rose 9.4 percent year on year but orders received dropped 38.6 percent during the same period.

According to the report, apartment transactions rose 9.2 percent year on year to 61,599 units in September.

The labor market also remained sluggish and the manufacturing sector continued to see its number of employees drop due to the corporate restructuring in the shipping and shipbuilding industries in Korea.

The data showed that about 267,000 people found new jobs, up 1 percent compared to the previous year, but sharply down from 387,000 last month.

“Employment growth exhibited a continued loss in manufacturing influenced by corporate restructuring and sagging exports and large drops in services,” said the report. “Corporate restructuring is weighing down manufacturing production and employment.”

September’s rate of labor force participation was 63 percent and the overall employment rate hit 60.5 percent. Both figures fell 0.1 percentage point from the previous month.

South Gyeongsang, where the troubled shipbuilding industry is concentrated, saw its unemployment rate rise 1.1 percentage points year on year to 3.4 percent in September.

The nationwide unemployment rate rose 0.2 percentage point to reach 4 percent.

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

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