ECONOMIC BULLETIN
Republic of Korea
April 2013
Vol.35 No.4
ISSN 2287-7266
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ECONOMIC BULLETIN (Republic of Korea)Vol.35 No.4 April 2013MOSF/KDI
The Green Book:
Current Economic Trends Policy Issues
Park Geun-hye Administration’s Economic Policy Directions for 2013 Supplementary Budget of 17.3 Trillion Won Proposed
Economic News Briefing
Korea Grows 2.0% in 2012
Government Structure Reorganized
Housing Market Boosting Measures Unveiled Korea, China and Japan Hold First Round of FTA Talks
Statistical Appendices 03
50
60
65
Economic Bulletin
Republic of Korea
April 2013
Vol.35 No.4
The Green Book: Current Economic Trends
Overview
1. External economic situation 2. Private consumption 3. Facility investment 4. Construction investment 5. Exports and imports
6. Mining and manufacturing production 7. Service sector activity
8. Employment 9. Financial markets
9.1 Stock market 9.2 Exchange rate 9.3 Bond market
9.4 Money supply & money market 10. Balance of payments
11. Prices and international commodity prices 11.1 Prices
11.2 International oil and commodity prices 12. Real estate market
12.1 Housing market 12.2 Land market
13. Composite indices of business cycle indicators
Policy Issues
Park Geun-hye administration’s economic policy directions for 2013 Supplementary budget of 17.3 trillion won proposed
Economic News Briefing Statistical Appendices
... 03
... 04
... 10
... 15
... 17
... 20
... 22
... 25
... 27
... 31
... 35
... 38
... 43
... 48
... 50
... 58
... 60
... 65
Contents
The Green Book
Current Economic Trends
The Korean economy has seen inflation remain stable, with economic indicators such as service output and investment improving. However, employment growth has been slowing down, while production and consumption continue to fall.
Taking into account the Lunar New Year effect, major indicators of the real economy, including production, consumption and investment, have been sluggish in the first two months of 2012.
In February, the economy added 201,000 jobs year-on-year, down from 322,000 in the previous month, while the employment and unemployment rates remain weak.
Consumer price inflation stayed stable in the 1.0 percent range in March, falling to 1.3 percent from the previous month’s 1.4 percent, as agricultural product prices fell due to improving weather conditions and personal service prices declined due to the expansion of childcare subsidies.
Mining and manufacturing production fell 0.8 percent month-on-month in February due to weakness in the semiconductor sector, while service output increased by 1.7 percent led by real estate & renting.
Meanwhile, the average month-on-month growth rate for mining and manufacturing production in January and February was 0.1 percent, which was low compared to 2.9 percent posted in the fourth quarter of 2012. The average monthly growth rate for service output in the first two months of the year was also 0.1 percent, nearly on par with the fourth quarter of 2012, when the average growth rate was 0.0 percent.
Despite an increase in durable and semi-durable goods sales, retail sales in February fell 0.1 percent from the previous month due to a decrease in nondurable goods sales. In January and February, retail sales declined by an average of 1.6 percent, whereas in the fourth quarter of the previous year retail sales had increased by an average of 0.4 percent.
Facility investment in February rose 6.5 percent month-on-month due to strong machinery and transportation equipment investment. However, facility investment declined by an average of 1.8 percent in January and February, while it had grown 0.8 percent in the fourth quarter of 2012.
Construction investment went up 7.0 percent, led by an improvement in building construction and civil engineering works. The January-February average growth rate was 5.2 percent, posting an improvement from 1.4 percent in the fourth quarter of the previous year.
Overview
Although the US economy shows signs of moderate recovery, external risks remain, such as fiscal anxiety in the US, political uncertainty in Italy and the aftermath of the bailout of Cyprus.
The US averted a government shutdown when Congress passed the budget plan for Fiscal Year 2013, but anxieties remain as the suspension of the debt ceiling is due to end on May 19.
The eurozone crisis persists due to the possibility of contagion stemming from the prolonged political vacuum in Italy* and the bailout agreement over Cyprus**.
* Fitch Ratings cut Italy’s sovereign credit rating from A- to BBB+, citing political uncertainty and diminishing prospects of additional structural reform.
** The EU agreed on March 25 to provide 10 billion euros in bailout loans to Cyprus and require the nation to undergo restructuring of its banking sector. The original bailout agreement reached on March 15 included plans to levy a tax on bank deposits, but the terms were renegotiated after Cyprus’s lawmakers rejected the bailout package amid opposition within the nation.
1.
External economic situation
Exports rose 0.4 percent year-on-year in March, thanks to the strong performance of IT-related items including mobile phones and semiconductors. The trade balance remained in the black at US$3.36 billion.
The cyclical indicator of the coincident composite index rose 0.1 point percent month-on-month in February, and the leading composite index fell 0.1 point.
In March, both the stock prices and the won fell, as geopolitical risks related to North Korea escalated, uncertainties over the eurozone spread, and foreign investors became net sellers of Korean stocks.
The decline in housing prices slowed from 0.2 percent to 0.1 percent in March, while the upward trend in rental prices accelerated from 0.3 percent to 0.5 percent.
Uncertainties linger both at home and abroad due to fiscal anxiety in the US, slow economic recovery in Europe and risks concerning North Korea. Meanwhile, the domestic economy remains stagnant due to weak consumption and sluggish investment.
The Korean government will closely watch the global and domestic economic situations, and reinforce policy responses by aggressively managing macroeconomic policies.
At the same time, the government will focus on securing the lives of the low- and middle-income classes through job creation and by stabilizing the prices of necessities, while continuing to adopt policies to improve the health of the economy.
The US growth rate in the fourth quarter of 2012 was revised upward to 0.4 percent and major economic indicators such as industrial production and retail sales have improved in the first two months of 2013, but business sentiment and job data have slumped in March.
The growth rate adjustment reflects accelerating growth in business and housing investment.
Growth rate (adjusted [ final, %)
0.1 [ 0.4 (GDP), 2.1 [ 1.8 (private consumption), 9.7 [ 13.2 (business investment), 17.5 [ 17.6 (housing investment), -3.9 [ -2.8 (exports), -6.9 [ -7.0 (government spending) Industrial production and retail sales both rose at a faster than expected pace in February. Industrial production rose 0.7 percent month-on-month, up from the initial estimate of 0.4 percent, while retail sales increased 1.1 percent from the previous month, exceeding expectations of 0.5 percent.
The housing market continued to recover as housing prices continued to rise for the 12th consecutive month and existing home sales in February increased by 0.8 percent month-on-month.
Case-Shiller Home Price Index (percentage change from the previous period) -0.4 (Q1 2012) [ 2.3 (Q2 2012) [ 1.7 (Q3 2012) [ 1.8 (Q4 2012), 1.0 (Jan 2012)
Meanwhile, the ISM Manufacturing Index declined in March, registering below the expected 54.0.
ISM Manufacturing Index (base=50)
50.5 (Jul 2012) [ 50.7 (Aug) [ 51.6 (Sep) [ 51.7 (Oct) [ 49.9 (Nov) [ 50.2 (Dec) [ 53.1 (Jan 2013) [ 54.2 (Feb) [ 51.3 (Mar)
Although the unemployment rate fell to 7.6 percent, nonfarm payroll growth fell short of expectations by a significant margin (190,000 [ 88,000) and the labor force participation rate fell to the lowest since May 1979.
US
World GDP growth
6 5 4
3 2 1 0 -1
(%)
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Nonfarm payroll increase (m-o-m, thousand)
153 (Jul 2012) [ 165 (Aug) [ 138 (Sep) [ 160 (Oct) [ 247 (Nov) [ 219 (Dec) [ 148 (Jan 2012) [ 268 (Feb) [ 88 (Mar)
Labor force participation rate (%)
63.7 (Jul 2012) [ 63.5 (Aug) [ 63.6 (Sep) [ 63.8 (Oct) [ 63.6 (Nov) [ 63.6 (Dec) [ 63.6 (Jan 2012) [ 63.5 (Feb) [ 63.3 (Mar)
(Percentage change from previous period)
2010 2011 2012¹ 2013¹
Annual Annual Q4 Annual Q1 Q2 Q3 Q4 Jan Feb Mar
Real GDP² 2.4 1.8 4.1 2.2 2.0 1.3 3.1 0.4 - - -
- Personal consumption expenditure 1.8 2.5 2.0 1.9 2.4 1.5 1.6 1.8 - - -
- Corporate fixed investment 0.7 8.6 9.5 7.7 7.5 3.6 -1.8 13.2 - - -
- Housing construction investment -3.7 -1.4 12.1 11.9 20.5 8.5 13.5 17.6 - - -
Industrial production 5.3 4.1 0.9 3.8 1.4 0.6 0.0 0.6 0.1 0.7 -
Retail sales 5.5 8.0 1.9 5.0 1.7 -0.3 1.3 1.5 0.2 1.1 -
Existing home sales -3.4 2.4 2.8 9.9 5.5 -2.0 5.1 3.3 0.8 0.8 -
Unemployment rate³ 9.6 9.0 8.7 8.1 8.3 8.2 8.1 7.8 7.9 7.7 7.6
Consumer prices 1.6 3.2 0.2 2.1 0.6 0.2 0.6 0.5 0.0 0.7 -
1. Preliminary 2. Annualized rate (%) 3. Seasonally adjusted
Source: US Department of Commerce
US GDP growth and industrial production
Source: US Department of Commerce & US Federal Reserve Board
10 8 6 4 2 0 -2 -4 -6 -8 -10
GDP (q-o-q, annualized rate) Industrial production (q-o-q)
2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
The Chinese economy continues to gradually recover, with exports registering double-digit growth for two straight months. However, there are increasing concerns that the recovery momentum may lose steam, as domestic consumption growth had slowed down in the first two months of 2013.
Exports are continuing to show signs of improvement, with exports in January and February growing 23.6 percent compared to the same period of the previous year.
However, domestic consumption growth is slowing, with industrial production and retail sales rising 9.9 percent and 12.3 percent, respectively.
Meanwhile, the lower than expected manufacturing PMI*, real estate regulations and concerns over bird flu infections** may hamper economic recovery in the coming days.
* The manufacturing PMI in March rose 0.8 points month-on-month to 50.9. This is lower than market expectations (51.2) and past trends (March PMI was usually 3.0 points higher than that in February).
** As of April 7, 21 people have been infected with bird flu in China, of which six have died.
China
US nonfarm payroll growth and unemployment rate
Sourse : US Department of Labor
800 600 400 200 0 -200 -400 -600 -800 -1,000
12
10
8
6
4
2
0
US nonfarm payroll growth (m-o-m, left) Unemployment rate (right)
2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
(Percentage change from same period in previous year)
2011 2012¹ 2013¹
Annual Q3 Q4 Annual Q1 Q2 Q3 Q4 Dec Jan Feb
Real GDP 9.3 9.1 8.9 7.8 8.1 7.6 7.4 7.9 - - -
Industrial production² 13.9 13.8 12.8 10.1 11.6 9.5 9.1 10.0 10.3 - 9.93
Fixed asset investment (accumulated) 24.8 24.9 23.8 20.6 20.9 20.4 20.5 20.6 20.6 - 21.23
Retail sales 17.1 17.3 17.5 14.3 14.9 13.9 13.5 14.9 15.2 - 12.33
Exports 20.7 20.7 14.4 8.3 8.8 10.5 4.5 9.5 14.1 25.0 21.8
Consumer prices² 5.4 6.3 4.6 2.6 3.8 2.8 1.9 2.1 2.5 2.0 3.2
Producer prices² 6.0 7.1 3.1 -1.7 0.1 -1.4 -3.3 -2.3 -1.9 -1.6 -1.6
1. Preliminary
2. Quarterly change: average of monthly change 3. Jan-Feb aggregate
Source: China National Bureau of Statistics
The Japanese economy continues to tread on thin ice, with the trade balance registering a deficit for the eighth straight month in February due to sluggish exports, and industrial production contracting.
Trade account balance (billion yen)
-529 (Jul 2012) [ -768 (Aug) [ -568 (Sep) [ -556 (Oct) [ -957 (Nov) [ -646 (Dec) [ -1,631 (Jan 2013) [ -779 (Feb)
Retail sales rose 1.6 percent from the previous month, but declined 2.3 year-on-year.
Deflation persisted even though import prices were up 13.2 percent year-on-year, with consumer prices falling 0.7 percent from the same period of the previous year.
Japan
(Percentage change from previous period)
2011 2012¹ 2013¹
Annual Q3 Q4 Annual Q1 Q2 Q3 Q4 Dec Jan Feb
Real GDP -0.6 2.5 0.1 2.0 1.5 -0.2 -0.9 0.0 - - -
Industrial production² -2.4 4.3 -0.4 -0.3 1.2 -2.0 -4.2 -1.9 2.4 0.3 -0.1
Retail sales -1.2 0.5 -0.5 1.6 1.2 0.3 -0.9 -0.2 0.0 -0.2 1.6
Exports (y-o-y) -2.6 0.5 -5.5 -2.8 -1.6 4.8 -8.2 -5.5 -5.8 6.4 -2.9
Consumer prices (y-o-y) -0.2 0.0 -0.2 -0.1 0.5 -0.2 -0.3 -0.1 -0.1 -0.3 -0.7
1. Preliminary
Sources: Japan's Cabinet Office, Ministry of Economy, Trade and Industry, Ministry of Finance, Statistics Bureau of Japan
China’s GDP growth and fixed asset investment
Source: National Bureau of Statistics of China
18 16 14
12 10 8 6 4
70 60 50
40 30 20 10 0
(%) (%)
2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
GDP (y-o-y, left) Fixed asset investment (accumulated, y-o-y, right)
Japan’s GDP growth and industrial production
Source: Japan’s Cabinet Office, Ministry of Economy, Trade and Industry
6
4
2
0
-2
-4
-6
25 20 15 10 5 0 -5 -10 -15 -20 -25
(%) (%)
2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
GDP (q-o-q, left) Industrial production (q-o-q, right)
The eurozone economy remained weak in February, with the unemployment rate reaching a record high level of 12.0 percent and the manufacturing PMI falling below its baseline of 50 for the 20th consecutive month.
Unemployment rate (%)
11.4 (Jul 2012) [ 11.5 (Aug) [ 11.6 (Sep) [ 11.7 (Oct) [ 11.8 (Nov) [ 11.8 (Dec) [ 12.0 (Jan 2013) [ 12.0 (Feb) (youth unemployment: 23.9%)
Manufacturing PMI (base = 50)
44.0 (Jul 2012) [ 45.1 (Aug) [ 46.1 (Sep) [ 45.4 (Oct) [ 46.2 (Nov) [ 46.1 (Dec) [ 47.9 (Jan 2013) [ 47.9 (Feb) [ 46.6 (Mar)
Eurozone
(Percentage change from previous period)
2010 2011 2012 2013¹
Annual Annual Q4 Annual Q1 Q2 Q3 Q4 Dec Jan Feb
Real GDP 2.0 1.4 -0.3 -0.5 0.0 -0.2 -0.1 -0.6 - - -
Industrial production 7.4 3.5 -2.1 -2.4 -0.5 -0.5 0.4 -2.4 0.9 -0.4 -
Retail sales 0.9 -0.5 -1.2 -1.7 -0.3 -0.8 0.0 -1.5 -0.8 1.2 -0.3
Exports (y-o-y) 20.1 12.7 8.3 7.4 8.6 8.1 7.4 5.5 -3.1 5.0 -
Consumer prices (y-o-y) 1.6 2.7 2.9 2.1 2.7 2.7 2.5 2.3 2.2 2.0 1.8
1. Preliminary Source: Eurostat
Private consumption in the fourth quarter (preliminary GDP) of 2012 increased 0.8 percent quarter-on-quarter and 2.7 percent year-on-year.
2.
Private
consumption
(Percentage change from previous period)
2011 2012¹
Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4
Private consumption² 2.4 0.7 0.6 0.1 -0.2 1.7 0.8 0.4 0.7 0.8
(y-o-y) - 3.2 3.1 2.1 1.2 - 1.3 1.0 1.7 2.7
1. Preliminary 2. National accounts Source: The Bank of Korea
Despite an increase in sales of durable goods, such as automobiles, and semi- durable goods, such as clothes, retail sales fell 0.1 percent month-on-month in February, as sales of nondurable goods, including car fuel, decreased. On a year- on-year basis, however, retail sales rose 1.8 percent.
Durable goods sales rose 3.2 percent as automobile sales recovered after taking a sharp dive in January due to the expiration of the individual consumption tax cut. Semi-durable goods sales also rose 1.9 percent, led by demand for clothes.
However, nondurable goods sales dropped 2.7 percent due to poor car fuel sales resulting from a rise in gasoline prices and diminished outdoor activities caused by heavy snowfalls and the cold weather.
Eurozone’s GDP growth and industrial production
Source: Eurostat
3
2
1
0
-1
-2
-3
10 8 6 4 2 0 -2 -4 -6 -8 -10
(%) (%)
2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
GDP (q-o-q, left) Industrial production (q-o-q, right)
Private consumption
Source: The Bank of Korea (national accounts)
14 12 10 8 6 4 2 0 -2 -4 -6
(%)
2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
Private consumption (y-o-y) Private consumption (q-o-q)
(Percentage change from previous period)
2011 2012 20131
Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 Dec Jan¹ Feb¹
Retail sales 4.5 1.4 0.8 0.5 0.0 2.3 1.0 0.3 1.2 0.4 0.4 -2.2 -0.1
(y-o-y) - 5.3 6.2 4.0 2.6 - 2.8 1.4 2.6 2.5 2.0 -3.1 1.8
- Durable goods² 10.6 3.8 0.5 0.7 -0.9 5.3 2.5 1.9 2.8 2.3 2.9 -7.8 3.2
• Automobiles 7.0 5.2 -3.3 4.6 -11.3 2.4 2.4 9.4 -1.6 9.0 3.8 -13.8 3.8
- Semi-durable goods³ 3.7 0.9 1.4 1.7 -2.7 -1.1 -0.4 0.3 -1.1 1.7 0.0 -0.5 1.9
- Nondurable goods⁴ 2.1 0.4 0.6 -0.1 1.6 2.3 0.9 -0.6 1.5 -1.1 -0.8 0.0 -2.7
1. Preliminary
2. Durable goods: Automobiles, electronic appliances, furniture, telecommunications devices, etc.
3. Semi-durable goods: Clothing, footwear, etc.
4. Nondurable goods: Food, medicine, cosmetics, fuel, tobacco, etc.
Source: Statistics Korea
Retail sales
Source: Statistics Korea (industrial activity trend)
25 20 15 10 5 0 -5 -10
(%)
2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1
Consumer goods sales (m-o-m) Consumer goods sales (y-o-y)
2010. 1 2011. 1 2012. 1 2013. 1
Retail sales by type
Source: Statistics Korea (industrial activity trend)
50 40 30 20 10 0 -10 -20 -30
(y-o-y, %)
2001. 1
Durable goods Semi-durable goods Nondurable goods
2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
Department store sales rose, but sales at large discount stores, specialized retailers and nonstore retailers decreased.
(Percentage change from previous period)
2011 2012 20131
Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 Dec Jan¹ Feb¹
Department stores 7.7 2.6 0.3 0.7 -0.1 1.8 -0.6 1.1 0.4 2.5 -3.9 -4.8 2.6
Large discount stores 5.6 -0.1 2.5 0.8 0.7 2.0 -0.7 0.8 1.2 -0.6 -2.3 -3.8 -0.9
Specialized retailers2 3.5 0.0 2.8 -1.2 0.8 -0.5 0.0 -1.6 1.4 -2.2 0.4 0.4 -0.1
Nonstore retailers 8.3 -0.6 2.6 2.0 1.2 9.8 3.0 2.8 2.6 2.4 -1.7 -1.1 -3.4
1. Preliminary
2. Specialized retailers are defined as stores carrying a few (1 to 3) specialized items.
Source: Statistics Korea
Retail sales in March may have recovered from January and February’s slump, as negative temporary factors, such as poor car sales resulting from the expiration of the individual consumption tax cut, were relieved, and sales of car fuel increased.
Domestic sales of automobiles in March recovered from the negative effects of the expiration of the individual consumption tax cut.
Domestic sales of automobiles (thousand)
76 (Aug 2012) [ 101 (Sep) [ 102 (Oct) [ 106 (Nov) [ 115 (Dec) [ 83 (Jan 2013) [ 81 (Feb) [ 98 (Mar)
Department store sales grew by a wider margin as there were two more weekend and holiday openings in March compared to the previous month. However, discount store sales growth turned negative due to an increase in mandatory closure days.
Gasoline sales rose in March, as domestic gasoline prices fell and more weekends and the holiday led to an increase in outdoor activities.
(y-o-y, %)
2012 2013
Aug Sep Oct Nov Dec Jan Feb Mar
Credit card sales 8.0 15.7 9.2 14.2 7.1 6.2 3.4 5.6
Department store sales -6.9 -0.8 -0.4 9.1 -0.2 -8.2 1.7 5.9
Large discount store sales -3.3 0.2 -6.6 -1.7 -5.0 -24.6 8.9 -4.5
Domestic sales of gasoline -2.7 1.6 7.9 3.7 -2.8 2.9 -8.0 7.3
Domestic sales of cars -20.2 -3.1 4.3 13.2 7.5 1.6 -13.5 -1.0
Sources: Credit Finance Association of Korea, Ministry of Knowledge Economy, Korea National Oil Corporation, Korea Automobile Manufacturers Association Ministry of Strategy and Finance (for March data)
Department store and discount store sales (current value)
Source: Ministry of Trade, Industry and Energy (monthly retail sales)
40 30
20 10 0 -10 -20 -30
(y-o-y, %)
Department store sales Discount store sales
2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
Domestic sales of cars
Source: Korea Automobile Manufacturers Association (monthly automobile industry trend)
180
160
140
120
100
80
60
100 80 60 40 20 0 -20 -40 -60
(thousand) (y-o-y, %)
2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
Domestic car sales growth (right) Domestic car sales (left)
Gasoline prices (won/liter)
1,988 (4th week Jan) [ 1,994 (1st week Feb) [ 1,992 (2nd week) [ 1,985 (3rd week) [ 1,978 (4th week) Growth in credit card use expanded due to an overall increase in consumption.
Consumption has been constrained due to a slowdown in employment and the burden of household debt, but it may show gradual improvement as the government’s policies for economic revitalization take effect.
Employment growth has been slowing since the fourth quarter of 2012, households continue to suffer from the burden of debt repayments, and the individual consumption tax cut on automobiles has expired, leading to a slowdown in consumption.
Employment growth (y-o-y, thousand)
467 (Q1 2012) [ 430 (Q2) [ 506 (Q3) [ 342 (Q4), 322 (Jan 2013) [ 201 (Feb) Interest costs compared with household income (%)
1.7 (2007) [ 1.9 (2008) [ 2.0 (2009) [ 2.1 (2010) [ 2.3 (2011) [ 2.3 (2012)
However, consumption may be boosted by stable prices and satisfactory consumer sentiment, and also when the government’s policies result in job creation, housing market stabilization and reinforcement of the role of public finances.
Consumer price inflation (y-o-y, %)
1.5 (Jul 2012) [ 1.2 (Aug) [ 2.0 (Sep) [ 2.1 (Oct) [ 1.6 (Nov) [ 1.4 (Dec) [ 1.5 (Jan 2013) [ 1.4 (Feb) [ 1.3 (Jan)
Consumer Sentiment Index (CSI, base=100)
100 (Jul 2012) [ 101 (Aug) [ 99 (Sep) [ 100 (Oct) [ 100 (Nov) [ 99 (Dec) [ 102 (Jan 2013) [ 102 (Feb) [ 104 (Mar)
Consumer sentiment index
Source: The Bank of Korea
130
120
110
100
90
80
70
(base=100)
2001. Q1 2004. Q1 2007. Q1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
Facility investment (preliminary GDP) decreased 1.8 percent quarter-on-quarter and 5.2 percent year-on-year in the fourth quarter of 2012.
(Percentage change from previous quarter)
2010 2011 2012¹
Annual Annual Q3 Q4 Annual Q1 Q2 Q3 Q4
Facility investment² 25.7 3.6 -1.8 -3.6 -1.9 10.4 -7.8 -5.2 -1.8
(y-o-y) - - 1.1 -3.6 - 8.8 -3.5 -6.9 -5.2
- Machinery 31.2 4.2 -2.3 -1.8 -1.1 11.3 -8.5 -6.0 -3.2
- Transportation equipment 8.3 1.4 -0.1 -10.8 -5.0 6.7 -5.2 -1.7 3.7
1. Preliminary 2. National accounts Source: The Bank of Korea
3.
Facility investment
Facility investment
Source: The Bank of Korea (national accounts)
40 30 20 10 0 -10
-20 -30
(%)
2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
Facility investment (q-o-q) Facility investment (y-o-y)
Facility investment by type
Source: The Bank of Korea (national accounts)
50 40 30 20 10 0 -10 -20 -30 -40
(y-o-y, %)
2001. Q1
Transportation equipment Machinery
2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
The facility investment index in February increased 6.5 percent month-on-month as both machinery and transportation equipment investment improved. The index fell 18.2 percent year-on-year. In the first two months of the year, the index declined by an average of 1.8 percent, compared with the fourth quarter of 2012, in which the average monthly growth rate was 0.8 percent.
(Percentage change from previous quarter)
2010 2011 2012 2013¹
Annual Annual Annual Q1 Q2 Q3 Q4 Dec Jan¹ Feb¹
Facility investment index 25.8 4.0 -2.0 6.4 -5.0 -6.8 0.8 6.3 -8.7 6.5
(y-o-y) - - - 10.7 -2.7 -8.2 -6.9 -6.3 -15.6 -18.2
- Machinery 30.2 2.7 -2.2 8.1 -5.5 -6.9 -3.8 2.7 -6.4 6.9
- Transportation equipment 8.9 9.8 -1.1 -1.0 -1.8 -6.7 22.0 21.2 -16.7 5.9
1. Preliminary Source: Statistics Korea
(Percentage change from previous quarter)
2010 2011 2012 2013¹
Annual Annual Annual Q1 Q2 Q3 Q4 Dec Jan¹ Feb¹
Domestic machinery orders 8.0 7.6 -13.4 -1.1 -19.8 -10.4 -21.5 -17.0 -6.0 -32.7
(q-o-q, m-o-m) - - - -5.3 -18.7 -2.0 3.9 -0.3 1.9 -1.3
- Public -45.7 -2.6 -11.0 126.1 -59.7 86.7 -54.6 31.2 155.1 -77.1
- Private 22.3 8.8 -13.6 -8.7 -15.1 -16.0 -15.1 -21.8 -10.4 -16.0
Machinery imports 40.4 7.1 -3.0 15.3 -4.3 -12.2 -8.2 -7.5 -4.4 -23.4
Average manufacturing operation ratio 80.3 80.2 78.1 79.6 79.0 76.2 77.8 78.4 78.7 77.8 Facility investment adjustment pressure² 8.8 1.1 -1.4 0.7 -1.3 -3.0 -1.5 -1.8 6.9 -10.8 1. Preliminary
2. Production growth rate minus production capacity growth rate in the manufacturing sector (%p) Sources: Statistics Korea, Korea International Trade Association
The improving consumer sentiment may bode well for facility investment, but poor leading indicators, such as machinery orders and facility investment adjustment pressure, may act as negative factors.
Business survey index for manufacturing sector (Bank of Korea)
81 (Jul 2012) [ 70 (Aug) [ 75 (Sep) [ 72 (Oct) [ 70 (Nov) [ 67 (Dec) [ 70 (Jan 2013) [ 72 (Feb) [ 76 (Mar) [ 80 (Apr)
Machinery orders and machinery imports
Source: Korea International Trade Association (KITA), Statistics Korea
10 9 8 7 6 5 4 3 2
70 60 50 40 30 20 10 0 -10 -20 -30 -40 -50
(trillion won) (y-o-y, %)
2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
Machinery orders (left) Machinery imports (right)
Construction investment (preliminary GDP) in the fourth quarter of 2012 decreased 1.2 percent quarter-on-quarter and 4.2 percent year-on-year.
(Percentage change from previous quarter)
2010 2011 2012¹
Annual Annual Q3 Q4 Annual Q1 Q2 Q3 Q4
Construction investment² -3.7 -4.7 -0.4 0.1 -2.2 -1.5 -1.3 0.7 -1.2
(y-o-y) - - -3.6 -1.7 - -0.4 -3.1 -0.3 -4.2
- Building construction -1.6 -2.7 -0.3 -1.0 -1.7 0.3 -2.6 0.1 -0.3
- Civil engineering works -6.2 -7.3 -0.7 1.5 -2.9 -3.9 0.4 1.5 -2.4
1. Preliminary 2. National accounts Source: The Bank of Korea
4.
Construction investment
The value of construction completed (constant) in February increased 7.0 percent month-on-month and 5.1 percent year-on-year, led by an improvement in building construction and civil engineering works. The January-February average growth rate of the value of construction completed improved from that of the fourth quarter of 2012, surging from 1.4 percent to 5.2 percent.
Construction investment by type
Source: The Bank of Korea (national accounts)
50 40 30 20 10 0 -10 -20 -30
(y-o-y, %)
2001. 1
Building construction Residential buildings Civil engineering works
2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1
Construction investment
Source: The Bank of Korea (national accounts)
20 15 10 5 0 -5
-10 -15
(%)
2001. Q1 2002. Q1 2003. Q1 2004. Q1 2005. Q1 2006. Q1 2007. Q1 2008. Q1 2009. Q1 2010. Q1 2011. Q1 2012. Q1
Construction investment (y-o-y) Construction investment (q-o-q)
(Percentage change from previous quarter)
2010 2011 2012 2013¹
Annual Annual Annual Q1 Q2 Q3 Q4 Dec Jan¹ Feb¹
Construction completed (constant) -3.2 -6.4 -5.8 -5.6 -0.9 1.0 1.4 2.1 -0.2 7.0
(y-o-y) - - - -4.9 -9.7 -2.3 -5.6 -8.3 8.9 5.1
- Building construction -7.0 -6.9 -7.6 -4.5 -4.8 1.0 1.8 3.0 1.9 7.6
- Civil engineering works 2.2 -5.6 -3.5 -6.9 4.1 0.9 1.0 1.1 -2.7 6.2
1. Preliminary Source: Statistics Korea
(Percentage change from same period in previous year)
2010 2011 2012 2013¹
Annual Annual Annual Q1 Q2 Q3 Q4 Dec Jan¹ Feb¹
Construction orders (current value) -17.7 6.1 -8.9 33.3 -0.7 -13.6 -33.1 -43.0 -52.7 -46.4
(q-o-q, m-o-m) - - - 15.1 -14.8 -6.1 -20.4 -10.8 -23.7 59.6
- Building construction -8.9 14.0 -8.7 27.4 -7.0 -7.1 -27.4 -37.5 -65.1 -7.1
- Civil engineering works -28.3 -6.0 -9.3 42.0 12.5 -26.3 -43.7 -51.6 -22.6 -72.6
Building permit area 19.3 9.9 -0.5 8.7 1.2 -7.3 -2.3 9.2 -4.8 -17.6
1. Preliminary
Sources: Statistics Korea, Ministry of Land, Infrastructure and Transport
Construction investment is expected to continue to suffer due to poor leading indicators such as construction orders and building permit area.
However, the housing market stabilization measures announced on April 1 may boost housing transactions and have a positive effect on construction investment.
Housing transaction growth (y-o-y, %)
-22.1 (Jul 2012) [ -34.6 (Aug) [ -44.3 (Sep) [ -15.2 (Oct) [ -8.0 (Nov) [ 2.4 (Dec) [ -5.7 (Jan 2013) [ -14.2 (Feb)
Leading indicators of construction investment
Source: Statistics Korea (construction orders)
Ministry of Land, Infrastructure and Transport (building construction permit area)
340 290 240 190 140 90 40 -10 -60 -110
(y-o-y, %)
2001. 1
Construction orders Building permit area
2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
5.
Exports and imports
Exports in March increased 0.4 percent (preliminary) year-on-year to US$47.50 billion.
Despite the fact that there was one fewer working day compared to the same period of the previous year, exports increased thanks to the strong performance of IT-related items such as mobile phones and semiconductors.
Export growth by item (y-o-y, %)
22.9 (mobile phones), 6.5 (semiconductors), 3.9 (petroleum products), -10.4 (automobiles), 2.9 (automobile parts), -13.2 (steel), -12.5 (vessels)
Average daily exports, an indicator adjusted to days worked, amounted to US$2.11 billion, up 4.8 percent year-on-year and posting growth for the fifth straight month since November 2012.
Average daily export growth (y-o-y, %)
-2.4 (Sep 2012) [ -1.2 (Oct) [ 3.9 (Nov) [ 7.1 (Dec) [ 1.6 (Jan 2013) [ 2.5 (Feb) [ 4.8 (Mar) Average daily exports (US$ billion)
2.01 (Mar 2012), 1.97 (Q1) [ 2.10 (Q2) [ 1.90 (Q3), 1.90 (Jan 2013) [ 2.07(Feb) [ 2.11 (Mar) Exports to China and the ASEAN countries continued to show robust growth, but exports to the US, EU and Japan remained weak.
Export growth by region (y-o-y, %)
6.2 (China), 17.5 (ASEAN countries), -8.4 (EU), -15.4 (US), -18.0 (Japan)
In the first quarter of 2013, exports inched up 0.5 percent year-on-year despite a decrease in days worked (1.5 days), while average daily exports increased 2.7 percent.
Exports by type
Source: Korea Customs Service, Ministry of Trade, Industry and Energy (export and import trend)
160 140 120 100 80 60 40 20 0 -20 -40 -60 -80
(y-o-y, %)
2001. 1
Export growth rate Automobiles Semiconductors Steel
2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
Imports in March dropped 2.0 percent (preliminary) from the previous year to US$44.14 billion.
Despite a slight increase in consumer goods imports, imports fell year-on-year as commodities and capital goods imports declined.
Import growth by category (Mar 1-31, preliminary, y-o-y, %) 0.3 (consumer goods), -2.4 (commodities), -2.2 (capital goods)
Imports by type
Source: Korea Customs Service, Ministry of Trade, Industry and Energy (export and import trend)
100 80 60 40 20 0 -20 -40 -60 -80
(y-o-y, %)
2001. 1
Import growth rate Commodities Capital goods
2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
(US$ billion)
2012 2013
Annual Mar Q1 Q2 Q3 Q4 Jan Feb Mar¹ Q1¹
Exports 547.87 47.33 134.85 140.13 133.13 139.77 45.70 42.34 47.50 135.54
(y-o-y, %) -1.3 -1.5 3.0 -1.7 -5.7 -0.3 10.9 -8.6 0.4 0.5
Average daily exports 2.00 2.01 1.97 2.09 1.90 2.04 1.90 2.07 2.11 2.02
1. Preliminary
Source: Korea Customs Service
(US$ billion)
2012 2013
Annual Mar Q1 Q2 Q3 Q4 Jan Feb Mar¹ Q1¹
Imports 519.58 45.05 133.67 130.43 125.65 129.83 45.20 40.32 44.14 129.66
(y-o-y, %) -0.9 -1.1 7.8 -2.8 -6.9 -1.0 3.9 -10.7 -2.0 -3.0
Average daily imports 1.90 1.92 1.95 1.96 1.79 1.89 1.88 1.96 1.96 1.94
1. Preliminary
Source: Korea Customs Service
Exports and imports
Source: Korea Customs Service, Ministry of Knowledge Economy (export and import trend)
60 50 40 30 20 10 0 -10
(US$ billion)
2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1
Exports Imports
2010. 1 2011. 1 2012. 1 2013. 1
Trade balance
Mining and manufacturing production in February fell 0.8 percent month- on-month and 9.3 percent year-on-year, as weakness in processed metals and semiconductors & parts offset growth in clothing & fur and medicine & medical products. The average production growth of January and February registered 0.1 percent, down from 2.9 percent in the fourth quarter of 2012.
Compared to the previous month, production of clothing & fur (up 30.3%), medicine
& medical products (up 6.3%) and medical, precision & optical instruments (up 6.1%) rose, while production of processed metals (down 6.5%), semiconductors &
parts (down 4.0%) and other transportation equipment (down 5.0%) fell.
Compared to a year ago, production of medical, precision & optical instruments (up 1.0%) and petrochemicals (up 0.3%) increased, while production of mechanical equipment (down 20.7%), processed metal (down 17.5%) and automobiles (down 16.5%) went down.
6.
Mining and manufacturing production
(US$ billion)
2012 2013
Annual Mar Q1 Q2 Q3 Q4 Jan Feb Mar¹ Q1¹
Trade balance 28.29 2.28 1.18 9.70 7.47 9.94 0.50 2.02 3.36 5.88
1. Preliminary
Source: Korea Customs Service
The trade balance (preliminary) in March posted a surplus of US$3.36 billion.
Industrial production
Source: Statistics Korea (industrial activity trend)
50 40 30 20 10 0 -10 -20 -30
(%)
2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1
Industrial production (m-o-m) Industrial production (y-o-y)
2010. 1 2011. 1 2012. 1 2013. 1
The manufacturing inventory-shipment ratio declined by 1.9 percentage points month-on-month as inventories decreased 2.6 percent and shipments fell 1.0 percent.
Inventories of electric equipment (up 3.8%), automobiles (up 2.7%) and groceries (up 2.6%) rose month-on-month, while semiconductors & parts (down 13.2%), mechanical equipment (down 3.9%), and primary metals (down 1.6%) declined.
Shipments of clothing & fur (up 16.0%), audio-visual communications equipment (up 3.3%) and semiconductors & parts (up 1.4%) climbed, while other transportation equipment (down 14.8%), processed metals (down 7.4%) and refined petroleum (down 5.3%) slipped.
The average operation ratio of the manufacturing sector fell by 0.9 percentage points month-on-month to 77.8 percent.
Shipment and inventory
Source: Statistics Korea (industrial activity trend)
10 8 6 4 2 0 -2 -4 -6 -8 -10
(m-o-m, %)
Shipment growth Inventory growth
2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
(Percentage change from previous quarter or month)
2011 2012 2013¹
Annual Q4 Annual Q1 Q2 Q3 Q4 Dec Jan¹ Feb¹
Mining and manufacturing activity2
Mining production (q-o-q, m-o-m) - -0.7 - 1.7 -0.5 -2.2 2.9 1.6 -1.2 -0.8
(y-o-y) 5.9 3.3 0.8 3.6 1.1 -1.0 -0.1 -0.4 7.6 -9.3
Manufacturing production (q-o-q, m-o-m) - -0.7 - 1.7 -0.5 -2.3 3.0 1.5 -0.9 -1.2
(y-o-y) 6.0 3.5 0.8 3.8 1.0 -1.1 -0.2 -0.5 8.0 -9.8
Shipment 5.6 -0.4 0.7 1.8 -0.3 -2.4 2.0 2.2 -0.9 -1.0
- Domestic demand 4.0 -1.4 -1.1 0.7 -0.3 -1.4 1.0 1.6 -0.8 -0.4
- Exports 7.7 0.9 3.0 3.2 -0.3 -3.6 3.2 3.1 -1.2 -1.8
Inventory3 1.8 1.8 2.3 1.6 -1.8 -3.0 2.3 2.3 1.1 -2.6
Manufacturing activity
Average operation ratio (%) 80.2 78.8 78.1 79.6 79.0 76.2 77.8 78.4 78.7 77.8
Production capacity4 4.9 4.0 2.2 3.1 2.3 1.9 1.3 1.3 1.1 1.0
1. Preliminary
2. Including mining, manufacturing, electricity, and gas industry 3. End-period
4. Percentage change from same period in previous year Source: Statistics Korea
Although exports of IT-related products such as semiconductors and mobile phones improved, mining and manufacturing production may decrease due to production disruptions in the automobile industry.
Average daily export growth (y-o-y, %)
-6.0 (Aug 2012) [ -2.4 (Sep) [ -1.2 (Oct) [ 3.9 (Nov) [ 7.1 (Dec) [ 1.7 (Jan 2013) [ 2.6 (Feb) [ 4.8 (Mar)
Export growth by item (y-o-y, %, Feb [ Mar 2013)
semiconductors (0.9 [ 6.4), mobiles phones (15.1 [ 22.9), automobiles (-16.3 [ -10.4)
Average manufacturing operation ratio
Source: Statistics Korea (industrial activity trend)
100
90
80
70]
60
50
( %)
2001. 1 2002. 1 2003. 1 2004. 1 2005. 1 2006. 1 2007. 1 2008. 1 2009. 1 2010. 1 2011. 1 2012. 1 2013. 1
