Government sees 'solid recovery' for second straight month, but consumption and jobs lag

The government assessed for the second consecutive month that the South Korean economy is maintaining a "solid recovery," citing strong export growth and healthy investment gains. It acknowledged, however, that consumer spending is improving only gradually, while employment difficulties — particularly among youth and other vulnerable groups — persist. Rising oil prices and uncertainty stemming from the war in the Middle East were also flagged as risks to the recovery.

The Ministry of Economy and Finance said in its October 2026 Green Book, a monthly economic assessment released Friday, that "the Korean economy is showing a solid recovery trend, with exports rising sharply and investment posting healthy gains, while consumption is improving gradually."

Last month's report had emphasized improving domestic demand alongside strong exports, but this month's assessment maintained the broad recovery narrative while drawing a distinction between investment and consumption, highlighting the difference in their pace of recovery.

Exports continued to post strong gains. September exports reached $120.94 billion, up 83.5 percent from a year earlier, accelerating from the 68.7 percent growth recorded in August. The average daily export value, adjusted for working days, rose 104.9 percent to $5.63 billion.

By product category, computer exports surged 435 percent and semiconductor exports jumped 263 percent. Cosmetics and ships rose 31 percent and 30 percent, respectively. Automobile exports, however, fell 5 percent. Imports came in at $71.09 billion, up 26.0 percent, leaving a trade surplus of $49.85 billion.

Consumption signals were mixed. The consumer sentiment index rose 2.1 points from the previous month to 106.6 in September. Retail sales in August, however, fell 1.8 percent from the prior month, extending a decline that began in July, when sales dropped 2.6 percent. Sales of semi-durable goods edged up 0.4 percent, while durable and non-durable goods fell 4.5 percent and 1.6 percent, respectively. Passenger car sales dropped 13.6 percent from the previous month.

Spending indicators also softened. The year-on-year growth rate of domestic card approvals slowed from 4.9 percent in August to 2.3 percent in September, and the growth rate for department store card approvals eased from 6.0 percent to 2.7 percent over the same period. Discount store card approvals and domestic passenger car sales fell 2.1 percent and 19.0 percent, respectively, compared with a year earlier.

Industrial production and facility investment both declined in August from the previous month. Overall industrial output fell 1.3 percent. Service sector and construction output rose 0.5 percent and 1.9 percent, respectively, but mining and manufacturing production dropped 4.8 percent. Facility investment fell 9.5 percent from the prior month, dragged down by a 32.8 percent drop in transportation equipment investment. On a year-on-year basis, however, facility investment was up 16.1 percent.

The coincident composite index cycle variation, which tracks current economic conditions, rose 0.5 points from the previous month. The leading composite index cycle variation, which signals future economic trends, fell 0.1 points.

Job growth slowed. The number of employed people stood at 29.266 million in September, up 113,000 from a year earlier — a smaller gain than the 184,000 increase recorded in August. Manufacturing employment rose by 16,000, returning to positive territory, but accommodation and restaurant jobs fell by 97,000 and construction employment dropped by 24,000. The number of employed people aged 15 to 29 declined by 147,000.

Consumer price inflation eased to 2.9 percent in September from 3.1 percent in August. Core inflation, excluding food and energy, stood at 2.8 percent, while the living price index rose 2.5 percent.

The ministry said "uncertainty stemming from the war in the Middle East has expanded somewhat, and household burdens continue to mount from inflationary pressure driven by high oil prices and difficult employment conditions for vulnerable groups and sectors." On the global economy, it said growth is continuing at a moderate pace but uncertainty persists due to the Middle East war and US tariff measures. The ministry added it would "make every effort to manage the supply and demand of key commodities to minimize the impact of the Middle East war, while strengthening policy efforts to stabilize livelihoods and ease polarization so that the warmth of growth can spread across the broader economy."