South Korea's real GDP expanded 0.6 percent in the second quarter from the previous quarter — three times the Bank of Korea's own forecast. Semiconductor-led exports drove the growth despite headwinds including the Iran war and base effects. Real gross domestic income, or GDI, a measure of the purchasing power citizens actually feel, posted its largest year-on-year increase in more than 38 years.
The Bank of Korea released its advance estimate of second-quarter real GDP on Thursday. Real GDP grew 0.6 percent quarter-on-quarter — three times the 0.2 percent growth the central bank projected in May. Compared with the same period a year earlier, the economy expanded 3.7 percent.
Growth slowed from the first quarter's 1.8 percent — the highest in 22 quarters — but semiconductor-driven momentum has actually solidified when accounting for base effects and the economic shock from the Iran war.
Second-quarter growth improved broadly across most categories, with construction investment the sole exception. Private consumption rose 0.4 percent from the previous quarter, as both goods — including home appliances — and services such as food and accommodation increased. Government consumption also grew 0.2 percent, driven mainly by national health insurance benefit spending.
Facilities investment rose 0.2 percent on higher machinery purchases, including semiconductor manufacturing equipment. Intellectual property product investment grew 3.3 percent, led by research and development and software — the fastest quarterly growth in 57 quarters since the first quarter of 2012, when it rose 5.4 percent.
Exports rose 1.4 percent, driven by semiconductors and machinery and equipment — about one-fifth the pace of the first quarter's 5.1 percent gain, which had been the largest increase in 22 quarters. Imports grew 0.8 percent, with automobiles and machinery and equipment leading the increase.
Construction investment fell 0.2 percent as civil engineering activity contracted — the weakest reading in two quarters since the fourth quarter of last year, when it declined 2.6 percent.
Output by economic activity showed a mixed picture. Manufacturing rose 1.2 percent quarter-on-quarter, led by computers, electronic and optical equipment, and machinery and equipment. The services sector expanded 1.1 percent, driven by wholesale and retail trade, accommodation and food services, finance and insurance, and information and communications. Agriculture, forestry and fishing fell 7.1 percent, pulled down by crop cultivation and fisheries, while utilities — electricity, gas and water — declined 1.3 percent on weakness in water supply and raw material recycling. Construction output shrank 1.9 percent, also reflecting the drop in civil engineering.
Real GDI rose 3.6 percent in the second quarter, outpacing real GDP growth of 0.6 percent by roughly sixfold. Real GDI adds the real trade gain or loss from changes in the terms of trade to real GDP, providing a gauge of the purchasing power citizens actually experience as export and import prices shift. On a year-on-year basis, real GDI climbed 15.6 percent — the highest growth rate since the first quarter of 1988, when it rose 16.4 percent, marking the largest increase in more than 38 years.
kimstar@heraldcorp.com
