NABO Economic Trends (No. 32)

Published on August 31, 2022
Published by Population & Strategy Analysis Division

■ Economic Trends
   With growth continuing in production and exports, the Korean economy has recently seen its retail sales and investment rather sluggish, even though employment indicators have been charting a positive path. In addition, the economy has been under the influence of uncertainties in external economic conditions, such as high oil prices and high exchange rates with trade balances posting deficits for four consecutive months.
   Exports in July increased by 9.4% YoY to USD 60.07 billion in line with the favorable upward trend of key industries. They have continued to be brisk for a significant period of time in the semiconductor and steel industries, and the automobile and petroleum industries have achieved record export volumes. Yet, imports increased significantly more than exports in July (up 21.8% YoY to USD 65.37 billion) due to rising material and intermediate prices, leading to a trade deficit of four months in a row (USD11.34 billion cumulative in 2022 and USD4.67 billion in July). Although energy and raw materials price hikes have slowed somewhat for some items, they are still high compared to the year before, contributing to trade deficits and inflation.
   The domestic consumer price index (CPI) in July stood at 6.3%, staying in the 6% range for the second straight month. The treasury bond (3-year-maturity) interest rate, which had continued to rise during 2022, declined MoM to 3.01% in July on concerns over an economic slowdown, and the won/dollar exchange rate rose to 1,304 won as the dollar continued to strengthen due to the preference for safe assets, etc.
   Employment continued its bullish trend in July, with the number of employed persons increasing by 826,000 YoY. On the other hand, retail sales in June decreased MoM for four consecutive months, and the Composite Consumer Sentiment Index (CCSI) in July fell sharply for two months in a row, prompting a rapid contraction in consumer sentiment. Despite the easing of the real estate tax, the volatility rate of the nationwide housing sales price index dropped further MoM in July due to concerns over interest rate hikes and an economic recession.

■ Pending Economic Issue 「Recent Economic Sentiment Indicator (ESI) trends and features」
   The Economic Sentiment Indicator (ESI) not only precedes real economic indicators such as GDP, but also features excellent timeliness, so it can be used to quickly grasp economic trends. However, with recent worsening of major ESIs, including the Business Survey Index (BSI) and Consumer Sentiment Index (CSI), the deteriorating economic sentiment needs to be closely monitored in order to track economic slowdown in relation to time lag. Meanwhile, the recently developed News Sentiment Index (NSI) is expected to aid existing economic statistics. Unlike other existing indicators, the NSI features data collected daily, making it more likely to be useful for prompt situation appraisal and impact assessment.