S. Korea Recovery Loses Momentum

South Korea’s modest economic recovery bolstered by the uptick in construction and facility investment is losing steam in the face of a slowdown in private consumption, a state-run think tank said Tuesday.

“The Korean economy exhibited improved investments, but private consumption weakened slightly, implying only modest growth,” the Korea Development Institute said in its monthly evaluation of the country’s economic conditions. “Construction investment continued the rapid growth and facilities investment improved on recovering exports,” Yonhap reported.

The value of construction completed advanced 14.4% and construction orders jumped 19.5% in January as a government-led boom in the real estate market has continued for more than a year.

January’s equipment index rose 11.4% on-year on the back of a brisk increase in machinery, which posted a 20% on-year growth over the cited period.

Exports were the brightest side of the South Korea economy, as February’s outbound shipments rose for four months in a row to mark a five-year high of 20.2% growth.

However, private consumption has slowed down for the month as consumer sentiment was dampened by the protracted tightened job market and lingering uncertainties over political issues.

“Retail sales advanced temporarily, but consumer sentiment remained weak, indicating continued sluggishness in the recovery of private consumption,” the KDI report said.

On a seasonally adjusted on-month basis, retail sales decreased 2.2%, accelerating from a 0.3% fall in November and a 0.5% drop in December. Moreover, private consumption-related services like the accommodation and food businesses fell 6.4% from a year earlier.

The composite consumer sentiment index stood at 94.4 in February, up slightly from the previous month’s 93.3, the lowest since March 2009.

The think tank said private consumption is unlikely to make a rebound in the short run as the local job market remains in a slump.