Ministry of Strategy and Finance of Republic o : Production and Investment Rise with Exports Improving while Consumption Slows Due to Low Confidence

Current Economic Situation, January 2017

Production and Investment Rise with Exports Improving,

while Consumption Slows Due to Low Confidence

The Korean economy has seen production and investment rebound with exports improving, but consumption slowed somewhat due to a high base effect and shrinking consumer confidence.

The economy added 339,000 jobs year-on-year in November, going up from 278,000 a year ago, backed by the brisk agriculture & fisheries and construction sectors. Job creation in the manufacturing sector remains weak (down 102,000, y-o-y).

Consumer price inflation slowed in December (1.5%→1.3%, y-o-y) compared with the previous month, despite rising oil product prices, as electricity rates fell and agricultural product prices rose at a slower rate.

Mining and manufacturing production in November picked up (-1.3%→3.4%, m-o-m) as the auto worker strikes came to an end and the index was no more affected by a production halt of Samsung's Galaxy Note 7 smartphones.

Service output rose 0.1 percent month-on-month in November, backed by financial & insurance services and transportation services.

Retail sales dropped (5.5%→-0.2%, m-o-m) on falling consumer confidence in November, as well as a high base effect from the previous month when the index soared backed by Korea Sales Festa.

Facility investment rose in November, up 5.9 percent month-on-month, due to increased investments by the IT industries, such as a high level of investments in semiconductor fabrication facilities. Construction investment rebounded, rising 6.4 percent month-on-month, backed by strong presales of new homes.

In November, both the cyclical indicator of the coincident composite index and the cyclical indicator of the leading composite index remained unchanged.

Exports increased for the second consecutive month in December, going up 6.4 percent year-on-year, due to strong semiconductors and other major export items, and more days worked (0.5 days, y-o-y).

Stock prices rose in December backed by bullish global stock markets, and the dollar-won exchange rate increased as a result of dollar appreciation amid expectations of additional rate hikes in the U.S.

Both housing prices (up 0.15%→0.07%, m-o-m) and Jeonse (lump-sum deposits with no monthly payments) prices rose (up 0.15%→0.08%, m-o-m) as demand decreased after seasonal spikes and the government measures to curb housing market overheating continued to show effects since they went into effect on November 3, 2016.

Although exports have been improving, there is a chance that recovery momentum will be hampered by internal and external uncertainties and sluggish domestic demand.

The government will successfully implement budgets frontloaded to the first quarter, the largest ever, and other 2017 economic policies, and closely monitor necessities prices to increase stability in the real economy.

Moreover, the government will operate an emergency task force and closely monitor developments in the economy and financial markets, and be thoroughly prepared for internal and external risks.

Key Statistics

Employment

	2013	2014	2015						2016
		Annual	Annual	Q1	Q2	Q3	Nov	Q4	Q1	Q2	Q3	Oct	Nov
Number of employed (million)	25.07	25.60	25.94	25.27	26.10	26.24	26.25	26.14	25.55	26.39	26.55	26.58	26.59
Employment rate (%)	59.5	60.2	60.6	59.0	60.7	60.9	60.8	60.5	59.7	60.8	61.1	61.1	61.1
(Seasonally adjusted)	59.5	60.2	60.3	60.5	59.9	60.3	60.4	60.5	60.5	60.1	60.5	60.5	60.6

Consumer Price Index

	2016
	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
y-o-y	0.6	1.1	0.8	1.0	0.8	0.7	0.4	0.5	1.3	1.5	1.5	1.3
m-o-m	0.2	0.4	-0.3	0.2	0.1	0.0	-0.2	0.3	0.6	0.1	-0.1	0.1

Mining and Manufacturing Production

(q-o-q, m-o-m, %)

Mining and Manufacturing			2015			2016
			Annual	Q3	Nov	Q2	Q3	Sep	Oct	Nov
Mining		(q-o-q, m-o-m)	-	1.7	-1.5	1.0	0.6	0.5	-1.3	3.4
		(y-o-y)	-0.6	-0.1	-0.2	1.0	0.6	-1.9	-1.3	4.8
Manufacturing	Production	(q-o-q, m-o-m)	-	1.7	-1.6	1.1	0.5	0.5	-1.0	3.4
		(y-o-y)	-0.6	-0.3	-0.2	1.1	0.7	-2.0	-1.3	5.0
	Shipment -Domestic consumption -Exports		-0.2 0.4 -1.0	2.1 1.5 2.7	-2.1 -1.2 -3.0	2.1 0.9 3.5	-0.1 0.0 -0.1	1.1 1.7 0.4	-1.3 -1.5 -0.9	2.4 4.5 -0.1
	Inventory		2.9	2.6	-1.0	-2.6	-3.5	-1.5	0.3	-1.1
	Average operation ratio		74.3	74.9	73.1	72.2	71.8	71.5	70.5	73.5
	Production capacity (y-o-y)		1.2	0.9	0.8	0.4	0.4	0.2	0.7	0.8

1. 1. Preliminary
2. 2. Including mining, manufacturing, electricity and gas industry
3. 3. End-period

Service Output

(q-o-q, m-o-m, %)

	2013	2014		2015					2016
	Annual	Annual	Q4	Annual	Q1	Q2	Q3	Q4	Q3¹	Oct¹	Nov¹
Service activity index	1.5	2.3	0.8	2.8	0.5	0.5	1.2	1.2	0.8	-0.3	0.1

1. 1. Preliminary

Retail Sales

(q-o-q, m-o-m, %)

	2013	2014			2015					2016
	Annual	Annual	Q3	Q4	Annual¹	Q1	Q2	Q3	Q4	Q3	Oct¹	Nov¹
Retail sales	-	-	1.4	0.3	-	1.0	0.7	1.3	3.1	-1.7	5.5	-0.2
(y-o-y)	0.7	2.0	2.0	2.4	3.9	2.2	3.4	3.6	6.1	3.6	2.5	3.2

1. 1. Preliminary

Facility Investment Index

(q-o-q, m-o-m, %)

	2014	2015					2016
	Annual	Annual	Q1	Q2	Q3	Q4	Q1	Q2	Q3¹	Oct¹	Nov¹
Facility investment index	5.2	6.3	-0.2	-2.2	5.2	-1.2	-8.7	6.4	-1.5	0.6	5.9
y-o-y	-	-	9.2	4.5	10.2	1.6	-7.1	0.8	-4.9	-4.2	10.2

1. 1. Preliminary

Construction Completed

(q-o-q, m-o-m, %)

	2014	2015					2016
	Annual	Annual	Q1	Q2	Q3	Q4	Q1	Q2	Q3¹	Oct¹	Nov¹
Construction completed (constant)	-0.7	2.3	4.1	-2.1	6.4	0.0	9.4	2.3	4.5	-0.3	6.4
y-o-y	-	-	-2.0	-3.9	5.9	8.0	14.8	19.2	17.1	17.8	25.9

1. 1. Preliminary

Composite Index of Coincident and Leading Indicators

	2016
	Apr	May	Jun	Jul	Aug	Sep¹	Oct¹	Nov¹
Cyclical indicator of coincident composite index	100.0	100.3	100.5	100.9	101.2	100.9	100.6	100.6
(m-o-m, %)	0.0	0.3	0.2	0.4	0.3	-0.3	-0.3	0.0
Cyclical indicator of leading composite index	100.4	100.4	100.3	100.4	100.7	100.9	101.0	101.0
(m-o-m, %)	0.1	0.0	-0.1	0.1	0.3	0.2	0.1	0.0

1. 1. Preliminary

Exports and Imports

(US$ billion, y-o-y, %)

	2014	2015				2016
	Annual	Annual	Q3	Q4	Dec	Annual¹	Q1	Q2	Q3	Q4	Nov	Dec¹
Exports	572.66	526.76	128.24	130.02	42.38	495.54	115.19	126.03	121.87	132.45	45.41	45.07
(y-o-y)	2.3	-8.0	-9.5	-12.0	-14.3	-5.9	-13.6	-6.7	-5.0	1.9	2.5	6.4
Average daily exports	2.11	1.93	1.87	1.86	1.77	1.82	1.73	1.88	1.78	1.87	1.89	1.84
Imports	525.51	436.50	107.96	106.27	35.46	405.72	93.81	99.25	102.36	110.29	37.21	38.07
(y-o-y)	1.9	-16.9	-18.7	-17.8	-19.2	-7.1	-16.1	-10.2	-5.2	3.8	9.3	7.3
Average daily imports	1.94	1.60	1.58	1.52	1.48	1.49	1.41	1.48	1.49	1.55	1.55	1.55

1. Preliminary

Please refer to the attached PDF file