Q3 Growth Hits 1.0%, Triple the Central Bank's Forecast

The Korean economy grew 1.0% in the third quarter from the previous quarter, exceeding by 0.7 percentage point the 0.3% projected in the Bank of Korea's revised economic outlook in August. With this growth, the economy expanded 3.4% from a year earlier. Following a 0.1% contraction in the fourth quarter of last year, the economy recorded growth of 1.8% in the first quarter and 0.6% in the second quarter this year, marking three consecutive quarters of positive growth.

Facilities investment led the growth, rising 4.1% on the back of machinery such as semiconductor manufacturing equipment, while exports also grew 2.3%, driven by semiconductors, machinery, and electrical equipment. Government consumption increased 1.9% as spending on supplies and health insurance benefits rose.

In terms of contribution to growth, the government sector contributed 0.8 percentage point, outpacing the private sector's 0.2 percentage point. Domestic demand contributed 0.9 percentage point and net exports 0.1 percentage point.

Private consumption fell 0.2% as both goods—such as passenger cars and home appliances—and services, including finance and dining, declined. This marks the first quarter-on-quarter drop in private consumption in three years and nine months, since the fourth quarter of 2022 (-0.1%), and the largest decline since the first quarter of 2022 (-1.0%).

By industry, manufacturing grew 2.0%, led by computers, electronics, and optical equipment as well as machinery, and construction also expanded 2.0%, while services grew only 0.2%. Finance and insurance (-4.3%), wholesale and retail along with lodging and food services (-0.4%), and real estate (-0.2%) all declined.

Real gross domestic income (GDI) rose 3.4% from the previous quarter, outpacing GDP growth. The year-on-year increase of 18.8% is the highest in about 49 years, since the fourth quarter of 1977 (19.0%).