Ministry of Finance and Economy's June Green Book maintains 'recovery trend' assessment; falling employment, 3.1% consumer price rise add to household burden; industrial output and investment lag despite improved sentiment

The government warned Friday that rising prices and slowing employment are weighing on household livelihoods, even as uncertainty from the Middle East war persists.

The Ministry of Finance and Economy said in its June "Recent Economic Trends" report, known as the Green Book, that "the Korean economy has continued its recovery trend, driven by strong exports and improved consumer and business sentiment, but concerns remain over household burdens from rising prices and slowing employment amid ongoing uncertainty from the Middle East war."

A visitor looks over job postings at the Seoul Western Employment and Welfare Plus Center in Mapo-gu, Seoul. [Photo by Lim Se-jun]
A visitor looks over job postings at the Seoul Western Employment and Welfare Plus Center in Mapo-gu, Seoul. [Photo by Lim Se-jun]

The government replaced the phrase "downside risk to the economy," used through last month, with language foregrounding household burdens from rising prices and slowing employment. The explicit mention of employment slowdown in the overall assessment is the first since January last year, shortly after the emergency martial law crisis. The government had referenced "employment difficulties concentrated in vulnerable sectors" in March but offered no employment-related assessment in April or May.

The shift appears to reflect growing concern over recent labor market conditions. The number of employed workers in May fell by 40,000 from a year earlier — the first year-on-year decline since December 2024, when payrolls dropped by 52,000 as domestic sentiment cooled in the aftermath of the emergency martial law declaration and year-end government job programs wound down. The unemployment rate rose 0.1 percentage point from a year earlier to 2.9 percent.

The surge in global oil and raw material prices following the outbreak of the Middle East war, along with mounting inflationary pressure and growing economic uncertainty, appears to have spilled over into the labor market.

Jo Seong-jung, head of the ministry's economic analysis division, said the prolonged Middle East war remains a downside risk, but major institutions including the OECD have recently raised their growth forecasts for the Korean economy and exports are rising on the back of strong semiconductor performance. "Rather than emphasizing only downside risks, we chose the word 'uncertainty' to capture both upside and downside factors," he said.

He added that employment indicators have weakened, with the number of employed workers turning negative, and said the pace of any employment recovery could be affected by how the Middle East conflict unfolds.

Inflationary pressure also intensified. Consumer prices rose 3.1 percent in May, up from 2.6 percent the previous month. The index excluding food and energy and the index excluding agricultural products and petroleum products each rose 2.5 percent, while the everyday living price index climbed 3.3 percent.

Key indicators from April's industrial activity survey were also weak. Total industrial output fell 0.6 percent from the previous month as production declined in mining and manufacturing, services and construction. Facility investment and retail sales each fell 3.6 percent.

However, strong exports and improved consumer and business sentiment underpinned the government's assessment that the recovery trend remains intact. Exports in May surged 53.2 percent from a year earlier, driven by expanded shipments of semiconductors, computers and ships. Average daily exports reached $4.28 billion, up 60.7 percent year on year.

Sentiment indicators also improved. The Consumer Sentiment Index rose 6.9 points from the previous month to 106.1 in May. The all-industry Corporate Business Survey Index came in at 98.9, up 4.0 points from the prior month, while the June outlook reading rose 3.7 points to 97.6.

The cyclical component of the coincident composite index, which reflects current economic conditions, rose 0.2 points in April from the previous month. The cyclical component of the leading composite index, which signals future trends, climbed 0.6 points.

The government assessed that the global economy is maintaining a modest growth trajectory but warned that the Middle East war is amplifying volatility in international financial markets and energy prices, raising concerns about supply chain disruptions, rising inflationary pressure and slower growth.

On the won-dollar exchange rate, which has remained above 1,500 won in recent weeks, Jo said the impact of exchange rate movements on exports has been diminishing over time. "The recent export strength owes more to rising global demand centered on semiconductors and the competitiveness of key industries such as secondary batteries, biotech health and shipbuilding than to the exchange rate," he said.

However, he cautioned that a weaker won could push up import prices and add to household burdens, saying the government is responding through a dedicated price task force.

The government said Friday it would maintain its emergency economic response framework to minimize the impact of the Middle East war, pledging to swiftly disburse supplementary budget funds — including a victim support fund for high oil prices — and to ensure stable supplies of key goods and overall price stability for households.


y2k@heraldcorp.com