SEOUL, November 9 (AJP) — South Korea's economy continues to expand on strong AI-related exports and investment, while household consumption remains stubbornly sluggish, the Korea Development Institute (KDI) said Monday.
In its November economic trends report, the state think tank noted the economy maintained solid growth, supported by strong external demand for semiconductors and a broader range of industries linked to artificial intelligence infrastructure.
Real gross domestic product expanded 3.4 percent from a year earlier in the third quarter, driven by exports and facilities investment.
Private consumption growth, however, slowed to 1.1 percent from 2.4 percent in the previous quarter, underscoring the limited spillover of the export boom into household spending.
KDI said income gains from the semiconductor boom had yet to spread clearly across households, while elevated oil prices and higher market interest rates continued to weigh on purchasing power.
Retail sales fell 0.4 percent in September from a year earlier, following a 0.1 percent decline in August, with durable goods sales dropping 10.8 percent.
On a seasonally adjusted basis, retail sales rebounded 3.6 percent from August, partly recovering from weakness in the preceding two months. They nevertheless remained 0.9 percent below their June level.
The institute also noted that some of the slowdown in third-quarter consumption reflected purchases brought forward before a temporary cut in automobile excise taxes expired in the second quarter.
Exports remained the economy's main growth engine.
Overseas shipments surged 93.7 percent in October from a year earlier, with average daily exports rising 76.1 percent. On a daily average basis, semiconductor exports jumped 226.8 percent and computer exports climbed 442.3 percent, helped by sharply higher prices.
The expansion extended beyond chips. Exports of electrical equipment rose 58.2 percent, nonferrous metals 25.2 percent and steel products 11.2 percent on a daily average basis, reflecting strong demand tied to AI data center investment.
KDI said the export boom was supported by higher shipment volumes as well as prices, with real goods exports increasing 8.8 percent from a year earlier in the third quarter.
Domestic investment also remained robust. Facilities investment rose 10.1 percent in September from a year earlier despite fewer working days, led by a 68.9 percent increase in semiconductor manufacturing machinery.
Investment in general industrial machinery and electrical and electronic equipment also grew 15.2 percent and 9.9 percent, respectively.
Inflation continued to constrain household spending even as the headline rate eased slightly.
Consumer prices rose 2.8 percent in October from a year earlier, compared with 2.9 percent in September. Core inflation remained at 2.8 percent, with higher semiconductor prices pushing up prices of information technology products, including mobile phones.
Mobile phone prices climbed 10.8 percent, while petroleum product prices rose 14.9 percent. Processed food inflation also accelerated to 2.9 percent from 2.1 percent as earlier increases in import prices filtered through.
KDI also warned that prolonged tensions in the Middle East and growing policy uncertainty in major economies continued to pose external risks to Korea's recovery.
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