Real wages up just 0.2% through July as high energy prices and weak wage growth crimp purchasing power; AI-driven exports and facility investment sustain broader economic momentum while accommodation and restaurant output falls

Processed food shelves at a hypermarket in Seoul [Yonhap]
Processed food shelves at a hypermarket in Seoul [Yonhap]

Exports and facility investment, led by semiconductors, continue to perform well, but the economic recovery has yet to reach households broadly, the Korea Development Institute said. High oil prices and weak wage growth are constraining household purchasing power, leaving consumption to improve only gradually.

In its October economic trends report released Monday, KDI said the economy "continues to improve, supported by strong AI-related exports and facility investment," but added that "consumption is improving only modestly as the benefits of the economic recovery have not spread broadly to households."

While KDI maintained its assessment that exports and investment are driving the recovery, it said the pace of improvement felt by households remains slow. "Upward price pressure from the supply side remains elevated as high oil prices persist, and the underlying pace of wage growth is weak, constraining the recovery of household purchasing power," the institute said.

Real wages rose just 0.2% in the January–July period this year, meaning inflation-adjusted pay was essentially flat and consumer spending capacity has not recovered sufficiently.

Consumer price inflation eased to 2.9 percent in September from 3.1 percent the previous month, but stripping out a base effect from telecommunications costs, underlying price pressure actually increased. The consumer price index excluding telecommunications rose from 2.7 percent in August to 3.1 percent in September, while core inflation on the same basis climbed from 2.6 percent to 2.8 percent.

Weakness also appeared in service sector output, which is closely tied to consumption. Output in accommodation and restaurants fell 2.8 percent, while arts, sports and leisure-related services declined 2.1 percent.

AI-related exports and facility investment, by contrast, continued to underpin the broader economic improvement. Total exports in September rose 83.5 percent from a year earlier, driven by information and communications technology products. On a per-working-day basis, the increase reached 104.8 percent.

Per-working-day semiconductor exports surged 304.9 percent and computer exports jumped 497.6 percent. Expanding demand for AI infrastructure investment also lifted exports of steel products and nonferrous metals by 15.3 percent and 49.1 percent, respectively.

Facility investment in August rose 16.1 percent from a year earlier. Although that was down from the 24.6 percent gain recorded the previous month, growth remained strong, centered on semiconductor-related machinery. KDI said manufacturing output in related sectors also continued to expand at a healthy pace, "partially easing the employment weakness in manufacturing."

Concerns over Middle East instability and US trade policy, which the institute had flagged as sources of economic uncertainty in previous months, were not separately mentioned in this month's report.


fact0514@heraldcorp.com