Consumption in Korea
Korea - Consumption
Second GDP release confirms sharp slowdown in Q1
According to a second GDP release, the economy grew 1.7% in the first quarter compared to the same quarter a year earlier, down from the 1.8% previously reported and the 2.9% growth logged in the fourth quarter of last year. In seasonally-adjusted terms, the economy shrank 0.4% in Q1 compared to the previous quarter, down from the 0.3% decrease previously reported and contrasting the 0.5% expansion in Q4.
A further deterioration in fixed investment (Q1: -8.6% year-on-year; Q4: -4.2% yoy) was confirmed to be primarily responsible for the economic slowdown in Q1, partly due to the struggling semiconductor sector. Alongside the downbeat investment reading, private consumption growth (Q1: +1.9% yoy; Q4: +2.8% yoy) and government consumption growth (Q1: +5.5% yoy; Q4:+7.1% yoy) both slowed.
Exports of goods and services decreased 0.2% in Q1, contrasting the 6.7% growth in Q4. Imports, meanwhile, plunged 5.1%, contrasting the 2.4% increase in Q4. Consequently, the external sector contributed 2.8 percentage points to economic growth in Q1 (Q4: +2.5 percentage points), the largest contribution since Q1 2013.
Looking ahead, growth will likely be moderate, as external pressures—chiefly a synchronized global slowdown in demand for technology and the escalating U.S.-Sino trade spat—weigh on exports. The government plans to boost the economy with a KRW 6.7 trillion (USD 5.9 billion) supplementary budget, which it unveiled on 23 April and is awaiting parliamentary approval. However, the bill is only making its way through Parliament very slowly and may not prove as impactful as the government would wish. This skepticism is summarized by Robert Carnell, chief economist at ING, who noted: “The government has a KRW 6.7tr stimulus package ready for implementation. They say it could be worth 0.1pp of GDP. That seems about twice as much as is likely”.
The Central Bank expects the economy to grow 2.5% in 2019. The analysts surveyed by FocusEconomics this month expect an expansion of 2.3% in 2019, which is unchanged from last month’s estimate. For 2020, our panel sees an expansion of 2.4%.
Korea - Consumption Data
|Consumption (annual variation in %)||1.7||2.0||2.2||2.6||2.8|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||1.55||1.55 %||Jul 11|
|Exchange Rate||1,174||0.21 %||Jul 11|
|Stock Market||2,081||-0.40 %||Jul 11|
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July 18, 2019
At its 18 July monetary policy meeting, the Bank of Korea (BOK) voted to cut the base rate to 1.50% from 1.75%, surprising market analysts who had expected the Bank to hold fire until August.
July 16, 2019
A long-standing feud escalated between Japan and South Korea in late June when political tensions rooted in an old wartime disagreement boiled over and Japan placed restrictions on exports to Korea of several high-tech materials.
July 2, 2019
Consumer prices fell 0.2% over the prior month in June, swinging from May’s 0.2% increase.
July 1, 2019
The Nikkei and IHS Markit manufacturing Purchasing Managers’ Index (PMI) dropped to a four-month low of 47.5 in June from 48.4 in May, falling further below the threshold that separates expansion from contraction in the manufacturing sector.
July 1, 2019
Merchandise exports tumbled 13.5% in annual terms in June, down from the revised 9.5% contraction logged in May (previously reported: -9.4% year-on-year), totaling USD 44.2 billion in June (May: USD 45.9 billion).