South Korea’s economy sharply lost steam in the second quarter, slowing to 0.6 percent after running a surprising 1.1 percent in the first quarter due to softening in exports and industrial activity while consumer demand still stayed fragile.

According to the preliminary data released by the Bank of Korea (BOK) on Thursday, the country’s gross domestic product (GDP) totaled 386.6 trillion won ($347.3 billion) in the April to June period, up 0.6 percent on quarter and 2.7 percent on year.

The central bank claimed a growth of 0.6 percent on the back of higher 1.1 percent in the first three-month period was not that bad.

To achieve the government’s annual 3.0 percent growth rate target this year, the Korean economy would have to expand by at least 0.8 percent in the following the two quarters.

The government hopes its near $10 billion extra budgetary spending will help bolster domestic demand in the second half.

As of 9:41 a.m., the main Kospi was 0.37 percent higher at 2,443.56. The won was up 8.5 won at 1,113.3 against the U.S. dollar.

Private consumption grew 0.9 percent on quarter, the highest in six quarters. Consumer sentiment improved on expectations for the new administration’s economic drive to boost wages and create jobs. While spending on clothing and shoes fell, expenditure on home appliances and mobile phones pushed up overall consumption.

Facilities investment grew a robust 5.1 percent thanks to the booming semiconductor industry. Construction investment grew 1.0 percent, stooping from a 6.8 percent gain in the first quarter.

Investment in software and other knowledge-based sectors grew 0.9 percent thanks to a push in research and development.

Exports fell 3.0 percent from the previous three months, compared with a 2.1 percent gain in the first quarter. Although demand for semiconductors remained strong, shipments of transportation equipment, petrochemicals and chemical products fell. Imports also declined 1.0 percent due to reduced import of crude oil.

By sector, manufacturing output and construction fell 0.2 percent and 0.3 percent, respectively. Agriculture and fisheries also dropped 2.5 percent due to a prolonged drought.

Services output grew 0.8 percent on growing demand for insurance, culture and other services.

Gross domestic income remained unchanged over the previous quarter at 403.5 trillion won, showing little change in consumer spending power.

By Kim Gyu-sik

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]