South Korea’s export and investment engine gathered pace in the third quarter, while households cut back. The economy grew 1.0%, accelerating from 0.6% in the second quarter and surpassing the 0.7% median forecast in a Reuters poll.
The result was also well above the Bank of Korea’s August forecast of 0.3% growth for the quarter. A central bank official estimated that semiconductors are responsible for about half of the economy’s growth.
Exports rose 2.3% during the quarter, driven by demand for chips, machinery and electrical equipment. Facilities investment increased 4.1%, led by spending on semiconductor manufacturing equipment.
South Korea’s exports topped $800 billion in the first nine months, exceeding last year’s full-year record. The figures underline how heavily the expansion rests on demand for semiconductors.
Domestic activity moved in the other direction. Private spending fell 0.2%, its first decline in nearly four years. Financial services activity dropped during a stock market slump, while car purchases fell amid strikes at major automakers.
Government consumption increased in the third quarter. Yet consumer sentiment slipped in October, adding to signs of caution among households.
On a year-on-year basis, gross domestic product grew 3.4%, above the 3.0% growth expected. If output in the fourth quarter merely matches its third-quarter level, annual growth would reach around 3.7%. The Bank of Korea had projected 3.3% growth for the year in August.
The stronger-than-forecast quarter comes after the Bank of Korea held rates last week, following back-to-back increases in July and September. The policy pause leaves the central bank facing an economy where chip-related exports and investment are expanding faster than private spending.
Comments (0)