South Korea's Economy Contracts as Construction Sector Falls

Seoul, South Korea - The nation's all-industry production fell 0.8 percent in May compared to the same month last year, marking the first decline in recent months as the weakness in the construction sector persisted, government data showed on Monday.

The Korea Development Institute reported that construction production decreased by 20.8 percent year-over-year in May, following a 21.1 percent decline in April. 

Industrial production growth slowed to 0.2 percent from 5.1 percent in the previous month.

Manufacturing activity showed mixed results. Semiconductor production increased 18.1 percent, while automobile output fell 3.2 percent. Metal processing declined 4.9 percent and pharmaceutical production dropped 10.7 percent, according to the monthly economic report.

Consumer prices rose 2.2 percent year-on-year in June, up from 1.9 percent in May. Core inflation remained unchanged at 2.0 percent. 

The acceleration reflected base effects from agricultural product prices, which declined 1.8 percent compared to a 4.7 percent drop in the previous month, and petroleum products, which increased 0.3 percent after falling 2.3 percent in May.

Export performance improved in June, with overseas shipments growing 4.3% year-over-year after contracting 1.3% in May. 

Ship exports surged 67.4 percent, while information and communications technology products increased 8.6 percent. The trade surplus reached $ 9.08 billion.

Exports to the United States posted modest growth of 1.9 percent, with automobile shipments declining 16.1 percent. 

Exports to China dropped by 0.4 percent, with semiconductor exports to that market decreasing by 6.2 percent.

Equipment investment rose 7.5 percent in May, down from 8.4 percent growth in April. 

Semiconductor manufacturing equipment investment increased 12.9 percent, while transport equipment investment gained 26.1 percent.

Machinery imports expanded 8.4 percent in June, led by semiconductor manufacturing equipment, which jumped 38.8 percent.

Employment increased by 245,000 positions year-on-year in May, though the unemployment rate remained at 2.7 percent on a seasonally adjusted basis. 

Construction employment fell by 106,000 positions, while manufacturing employment dropped by 67,000. 

Service sector employment gained 540,000 positions.

Retail sales declined 0.2 percent year-on-year in May. 

Passenger car sales increased 13.4 percent, while retail sales excluding passenger cars fell 1.6 percent. 

Furniture sales dropped 10.8 percent, cosmetics declined 8.5 percent, and household electrical appliances fell 6.1 percent.

The consumer sentiment index rose to 108.7 in June from 101.8 in May, representing the second consecutive monthly increase.

Housing sales prices nationwide edged down 0.02 percent month-on-month in May. 

Seoul prices increased 0.38 percent, while Gyeonggi province prices fell 0.05 percent and non-capital area prices declined 0.12 percent. 

Housing transaction volumes in Seoul rose 28.7 percent year-on-year.

The Korea Development Institute noted that trade-related uncertainty remained elevated as negotiations had stalled ahead of the expiration of mutual tariff suspensions between trading partners.