Economy ‘continues to improve’ on back of strong exports, AI-related investment, think tank says

The economy continued to improve, supported by strong exports and investment related to AI infrastructure at home and abroad, a state-run think tank said Monday.

"The Korean economy continues to improve, led by sectors closely tied to AI-related investment," the Korea Development Institute (KDI) said in its monthly economic assessment. It said the analysis comes despite persistent uncertainties surrounding developments in the Middle East.

"Exports and equipment investment continue to post strong growth amid expanding AI infrastructure investment, while manufacturing production continues to expand in related industries," the KDI said.

Industrial output rose 3.1 percent in July from the previous month, slowing from a 4.4 percent increase in June, but remaining above the second quarter average of 2.9 percent, indicating steady improvements.

Exports expanded 68.7 percent in August from a year earlier as outbound shipments of semiconductors surged more than 200 percent on rising chip prices.

Investment remained strong, with facility investment rising 24.9 percent in July on increased spending on semiconductor-related facilities and equipment.

However, the think tank noted that private consumption remained modest as the broader economic improvement has yet to fully feed through to household incomes.

"Consumption is improving only modestly, constrained by the limited improvement in household purchasing power," it said.

Retail sales fell 0.8 percent in July, reversing a 3.9 percent growth in June, due to a sharp decline in durable goods sales.

The KDI also pointed out that Asia's No. 4 economy still faces uncertainties, including U.S. tariff policies and lingering geopolitical instability in the Middle East.

Yonhap