The economy is gradually moderating as the weak chip sector has started to improve, according to a report from the state-run Korea Development Institute (KDI) on Monday.

“Services production continues on a modest upward trajectory, and the sluggishness in manufacturing production is showing signs of moderation, led by semiconductors,” said the KDI in a report.

Production across the entire sector grew 1.1 percent in June from a month earlier, led by the strong growth of car production which jumped 10.8 percent.

On-month chip production fell 15.9 percent over the period, compared to a drop of 18.7 percent and 21.6 percent in May and April, respectively. Chip shipments grew 15.6 percent in June compared to a drop of 20.5 percent in May. Inventory jumped 49.1 percent, weakening from the growth of 80.7 percent in May.

“Semiconductors, a significant factor contributing to the slowdown, exhibited signs of easing with a substantial increase in export volumes,” KDI said.
 
Exports have been gradually improving since the fourth quarter of last year. Exports in July nosedived 16.5 percent from a month earlier, falling rapidly from a drop of 6 percent in June. But that is attributed to the changes in days operated and those base effects, according to the KDI.  

Industrial output rose 3.3 percent while inventory slid 6.2 percent over the period.

Service production advanced by 3.5 percent on month, led by the finance and transportation, financial and insurance services and transport and warehousing sectors.

The accommodation and restaurant sector fell 4.5 percent over the period due to a base effect in the measurement of data from last year.

The Consumer Composite Sentiment Index, which measures the level of optimism that consumers have about the performance of the economy, stood at 103 in July.

The figure has been rising since it reached 90.2 in February.

“The global economy has recently improved centered on the United States, but downside risks remain due to the rise of raw material prices and the delay in China’s economic recovery,” the KDI said, further adding that although global economic growth forecasts for this year have been revised up slightly, the inflation and monetary tightening which follow remain as risks.

The International Monetary Fund lifted its 2023 global growth estimates to 3 percent in July from the previous prediction of 2.8 percent assessed in April.

BY JIN MIN-JI [jin.minji@joongang.co.kr]