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Headline Firmer Than Expected, But Details Don't Suggest Firm Underlying Spending


Headline GDP growth was slightly firmer than expected for South Korea in Q2. The q/q outcome came in at +0.6%, against a +0.5% forecast (+0.3% prior), which saw a slightly firmer than expected y/y pace at 0.9% (0.8% forecast and 0.9% prior).

  • Some resilience in y/y growth momentum is consistent with business and consumer sentiment surveys stabilizing since the start of the year. The chart below overlays manufacturing sentiment against y/y GDP growth.
  • Still the detail wasn't all that positive, with q/q contractions for major expenditure components:
  • Private consumption -0.1%, construction investment -0.3%, facilities investment -0.2% and exports -1.8%, although imports recorded a larger q/q fall of -4.2%. Government spending was also softer at -1.9%.
  • By industry, the trends were more mixed, manufacturing up 2.8% q/q, and services +0.2% (after being flat in Q1). This offset construction and utilities weakness.
  • Overall, while the headline result will be welcome, the detail showed the domestic economy is not on strong footing in terms of the expenditure components. Export growth also looks uncertain, with the first 20-days of July data showing renewed headwinds.

Fig 1: South Korean Y/Y GDP & Manufacturing Sentiment

Source: MNI - Market News/Bloomberg/BOK

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