Growth Remains Solid on AI Investment, but Trickle-Down to Households Is Slow
In its November Economic Outlook released Friday, the Korea Development Institute (KDI) assessed that the Korean economy is maintaining solid growth momentum thanks to robust AI infrastructure investment, but that the pace at which the benefits of the economic recovery are spreading to households remains slow.
Exports and capital investment are showing markedly strong performance. October exports soared 76.1% year-on-year on a daily-average basis, driven by semiconductors (226.8%) and computers (442.3%), which surged on sharply higher prices, while AI infrastructure-related items such as non-ferrous metals (25.2%) also performed well. Facility investment in September likewise grew 10.1%, led by semiconductor manufacturing machinery (68.9%).
By contrast, indicators of how the economy feels on the ground remain lackluster. The trickle-down effect of semiconductor-boom income gains has yet to reach households, and burdens from high energy prices persist. Indeed, the September retail sales index fell 0.4%, centered on durable goods (-10.8%), and private consumption in the third quarter grew just 1.1% in the national accounts—half the previous quarter's rate of 2.4%.
KDI analyzed that inflation remains elevated on a rebound in international oil prices, while rising market interest rates are also constraining household spending capacity. It added that the Kospi's 16.2% drop in October from the previous month's close, which increased stock market volatility, is also weighing on consumer sentiment.
The change in this month's report lies in its view of external risks. KDI noted that external risk factors persist, including the continued conflict in the Middle East and growing policy uncertainty among major countries—a return, after just one month, to the Middle East tensions and policy uncertainty it had excluded from last month's report.
