Summary and Assessment

* All growth figures are on a year-on-year basis unless otherwise noted.

Recent Korean economy appears to continue its improvement trend

with continued growth in exports and recovery in investment.

Production growth in the mining & manufacturing appears to

maintain its overall recovery trend, whereas the growth pace of
service industry production appears to slow slightly.

The growth rate of the mining & manufacturing production index in

November recorded 17.8%, a high rise from the previous month, due to
technical factors of low growth rate of the same month of the previous
year. [Table 2-1]

— By sector, the petroleum and vehicle sectors recorded a sharp rise, led by
the semiconductor and components.
13
— The seasonally adjusted month-on-month growth rate registered a 1.4%
growth, as the growth rate of IT sectors turned to rise for the first time
in five months and that of vehicles improved as well.

— By size of corporations, it turns out that large companies with a high

export ratio recorded larger production than before the financial crisis,
while medium- and small-sized companies have improved moderately.

Industrial Production by Firm Size

(2005=100)
150

140

130
120
110

100

90
80
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2006 2007 2008 2009
Large Enterprise Small & Medium Enterprise

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 The service industry activity index registered 3.3%, up from the previous
month (1.3%), owing to base effect, but its seasonally adjusted
month-on-month growth rate registered a fall for two consecutive months.
[Table 2-4]

— The seasonally adjusted month-on-month growth rate registered a -1.2%

growth, continuing the pace of the previous month (-1.5%), mainly due to
sluggish performance in wholesales & retail sales, transportation, and
hotels & restaurants.

Industrial and Service Production

( Year-on-Year % Change)
20

10

-10

-20

-30
14 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2006 2006 2007 2008 2009
Industrial Production Index Service Production Index

The average capacity utilization rate in the manufacturing industry

recorded 77.3%, the same as the previous month.

Manufacturing Average Operation Ratio

(%)
90

80

70

60
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2006 2007 2008 2009

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 Production-inventory cycle indicated towards a faster recovery phase in
semiconductor and IT industries while overall recovery trend is being
maintained with continued upward trend in production. [Table 2-3]

Recent ProductionㆍInventory Cycle

Whole Industry SemiconductorㆍIT
15 40
09.IV 07.IV 08.II
10 30 09.IV 07.IV
Production Growth (%)

Production Growth (%)

08.I 08.I 08.II
5 09.III 07.III 08.III 20
07.III
0 10 08.III
09.III
-5 09.II 0
09.II
-10 08.IV -10
09.I
-15 -20 09.I
08.IV
-20 -30
-18 -12 -6 0 6 12 18 -40 -20 0 20 40 60 80
Inventory Growth (%) Inventory Growth (%)

Note. Figures for the fourth quarter of 2009 is from October to November.

15
The composite index in November showed that the leading index
continued to improve while coincident indexes remained at a similar
level as the previous month. [Table 2-1]

Coincident and Leading Indexes of Business Cycle

(Base=100) (%)
103 14
12
10
100
8
6
97 4
2
0
94
-2
-4
91 -6
9 12 3 6 9 12 3 6 9 12 3 6 9
2006 2007 2008 2009
Cyclical Component of Coincident Composite Index(left)
12-month Smoothed Change in Leading Composite Index(right)

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 Consumption-related economic indicators suggest that its
pace of improvement is continuing.

The consumer goods sales index in November recorded a growth rate of

10.0%, similar to the previous month (9.8%), led by durable goods.
[Table 3-2]

— By sector, durable goods recorded a high rise of 39.5% due to base

effect, while quasi-durable (1.3%) and non-durable goods (2.1%)
maintained their upward trend.

— Meanwhile, the seasonally adjusted month-on-month growth rate recorded

a -0.9% growth, as durable goods rose by 4.4% but quasi-durable and
non-durable goods recorded -1.9% and -3.3%, respectively.

The consumer goods shipment index for domestic demand in November

recorded 10.7%, higher than the previous month (0.3%), led by durable
goods, and the seasonally adjusted month-on-month growth rate recorded
0.8%. [Table 3-3]
16
The consumer sentiment index in December registered 113, the same as
the previous month, remaining higher than the base level (100). [Table
3-4]

Sales Index by Consumer Goods and Consumer Goods Shipment Index

(Year-on-Year % Change)
12

-4

-8

-12
6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2005 2006 2007 2008 2009
Sales Index by Consumer Goods(3MA) Consumer Goods Shipment Index(3MA)

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 Investment-related indicators improved significantly in November.

With equipment investment index recording a high rise of 10.3%,

compared to the previous month (0.5%), the pace of improvement in
domestic machinery orders received, a leading indicator, is continuing to
rise further, compared to the previous month (0.5%). [Table 4-1]

— Domestic machinery orders received, a leading indicator, recorded a

56.6% growth, as its growth pace in both private and public sectors
rises. [Table 4-3]

Construction-related indicators show that amid the continued improvement

trend in the construction orders received, the value of construction
completed turned to rise from decline in the previous month. [Table 5-2]

— The value of construction completed recorded a 4.2% growth, due to the

rise in both private and public sectors.

— The construction orders received registered a 77.0% growth , up from the

previous month ( 27.2%), attributable to increases in civil works in the 17
public sector and construction orders in the private sector.

* C onstruction Orders Received at Current Price (trillion): (August) 4.4 →

(September) 8.7 → (October) 10.4 → (November) 14.4

Machinery and Construction Orders Received

(Year-on-Year % Change)
80
60
40
20
0
-20
-40
-60
-80
3 6 9 12 3 6 9 12 3 6 9
2007 2008 2009
Machinery Orders Received(3MA) Construction Orders Received(3MA)

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 With the continued steady growth of exports in December, the
trade account surplus registered $3.3 billion, slightly down
from the previous month, as the growth of imports rose
significantly.

Exports registered a growth rate of 33.7%, with exports of most items to

most trading partners growing further. [Table 6-1]
— Exports of semiconductor and LCDs registered a marked rise of 125.5%
and 177.7%, respectively. [Table 6-1]

— A return to rise or further growth was recorded in exports to major

advanced economies whose recovery has been tepid so far. [Table 6-2]

The growth rate of imports recorded a 24.0% growth, showing a further

rising trend led by consumer goods and raw materials. [Table 6-3]

Balance of Payment in November 2009

Current account recorded a surplus of $4.28 billion, a slight fall from

the previous month ($4.76 billion), influenced by the aggravated
18
service account amid a slight rise in goods account. [Table 6-6]
— Goods account registered a surplus of $5.84 billion, a slight increase from
the previous month ($5.68 billion), while both imports and exports return
to the rising trend.
— Service account recorded an increased deficit of $1.16 billion, slightly
larger than the previous month ($1.31 billion), owing to aggravated
deficits of both travel and other service accounts.
Capital account recorded a net inflow of $1.54 billion, similar to the
previous month, due to the reduced net inflow of the portfolio
investment account and the increased net outflow of direct investment
accounts, despite other investment accounts recording a turnaround to
net inflow. [Table 6-7]
— The direct investment account recorded a net outflow of $2.84 billion,
a rise from the previous month ($510 million), due to the rise in direct
overseas investment by domestic investors.
— The portfolio investment account recorded a net inflow of $3.39 billion, a
decrease from the previous month ($6.13 billion) due to a decreased
investment by foreigners in domestic bonds and the outflow caused by
the repayment of the overseas bond.

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 In November, the number of hired workers fell by 10,000 and
the participation rate in economic activities fell by 0.7%p.
However, the sluggishness in employment conditions seems
to improve gradually, taking into account different survey
periods.

The number of hired workers in the agriculture, forestry and fisheries

fell by 151,000, due to the delayed survey period in November, but the
number of hired workers in other sectors rose by 140,000. [Table 7-2]

The growth rate of the number of unpaid workers recorded a -5.7%

growth, down from the previous month (-4.9%), but the growth of the
number of paid workers recorded 2.5%, up from the previous month
(2.3%). [Table 7-3]

— Changes in the number of paid workers in non-public sectors, excluding

public administration, defense and social security administration
(year-on-year, thousand people): (June ’09) 83 → (July) -91 → (August)
54 → (September) 140 → (October) 43 → (November) 95 19

CPI in December recorded a 2.8% growth rate, up from the

previous month (2.4%), led by commodity prices. [Table 8-1]

The growth rate of commodity price recorded 4.4%, up from the

previous month (3.5%), led by industrial products, as the growth rate of
service prices recorded 1.8%, the same as the previous month.

Core inflation registered 2.2%, down from the previous month (2.5%),
and its month-on-month growth rate recorded 0.1%, showing signs of
stabilization.

The purchase price of apartments nationwide registered a 0.2% growth

rate, slightly down from the previous month (0.3%), influenced by the
stabilization of purchase prices in Seoul and metropolitan areas. [Table
8-3]

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 The domestic financial market In December appears to remain
stable.

The market interest rates recorded a rise from the previous month, due
to the expectation that the Bank of Korea might raise interest rates.

— The Treasury bond yields recorded 4.41% as of late December, up by 31bp

from the previous month.

— AA- corporate bond yields recorded 5.53% (32bp up from the previous
month), while BBB- corporate bond yields recorded 11.58% (22bp up
from the previous month).

— Accordingly, the term spread recorded 242bp as of the end of December, up

by 32bp from the previous month (210bp) , while the credit spread between
AA- and BBB- corporate bonds recorded 605 bp, down by 10 bp from the
previous month.

The KRW/USD exchange rate rose slightly to 1,167.6 won as of the end
20 of December, attributable to the strong dollar trend.

The KOSPI index rose to record 1682.77, influenced by the steady

growth rate of GDP for the third quarter and the upward revision of
IMF's growth rate forecast.

Interest Rates
(%)
14

12

10

0
3 6 9 12 3 6 9 12 3 6 9 12
2007 2008 2009
Target Rate Treasury Bonds Corporate Bonds(AA-) Corporate Bonds(BBB-)

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 The global economy is showing signs of a modest recovery
led by the improvement in major economic indicators, though
there are still risk factors, such as the possibility of credit
crisis spreading across the Eurozone.
In advanced countries, the expectation of economic recovery is gradually
spreading amid the continued improvement trend in production and
consumption, as the contraction in employment conditions has moderated
faster than anticipated in some advanced economies.
Retail Sales Unemployment Rate
in the U.S., Eurozone, and Japan in the U.S., Eurozone, and Japan
(Ye ar-on-Ye ar % Ch ange) (% )
12 12

8
10

4
8

0
6
-4

4
-8

-12 2
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 21
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
U .S . E u ro Japan U .S . E u ro Japan

The economies of developing countries are recovering relatively fast led

by newly emerging markets in Asia, as the expansionary policies by
each government have taken effect, helping improve domestic demand
and exports.
Exports in China, India, and Taiwan Leading Indicators in China, India, and Brazil
(Year-on-Year % Ch ange) (Year-on-Year % Ch ange)
60 8

40
4

20
0

0
-4
-20

-8
-40

-60 -12
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
China India Taiw an Ch ina India B razil

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 The US economy demonstrated a gradual improvement in production and
consumption by major economic agents, while sluggishness in the
employment market has moderated with a slight fall in the unemployment
rate.
— The unemployment rate in November recorded 10.0%, indicating a slight
improvement in employment conditions, compared to the previous month,
and the rising trend of leading economic indicators continues.

U.S. Industrial Production and Leading Index

(Y e a r - o n - Y e a r % C h a n g e )
8 6

4 4

0 2

-4 0

-8 -2

-12 -4

-16 -6
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2005 2006 2007 2008 2009
22 In d u s t r ia l P ro d u c t io n (le ft ) L e a d in g In d e x(rig h t )

In Eurozone, concerns are still raised over the possibility of credit crisis
in some countries, but there are also signs of a gradual economic
recovery, such as the moderating slowdown in production and
consumption and the rapidly improving sentiment indexes.

Industrial Production and Economic Sentiment Indicator in Eurozone

(Y e a r - o n - Y e a r % C h a n g e ) (T r e n d = 1 0 0 )
20 120

110
10

100
0

90

-10
80

-20
70

-30 60
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2005 2006 2007 2008 2009
In d u s t r ia l P r o d u c t io n (le ft ) E c o n o m ic S e n t im e n t In d ic a t o r (r ig h t )

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 In Japan, the growth rate for the third quarter was revised sharply
downward, but with additional economic stimulus policies and improved
overseas conditions, consumption sentiment and exports have maintained
their recovery trend.
— Despite continued low equipment investment, its real economy is gradually
recovering, as the declining pace of industrial production has slowed
significantly due to the recovery in exports.

Japan's Export and Leading Index

(Ye a r-on -Ye ar % Ch a n ge )
30 10

5
15

0
0

-5
-15
-10

-30
-15

-45
-20

-60 -25
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2005 2006 2007 2008 2009
23
E xport(le ft) L e adin g In de x(righ t)

Meanwhile, the Chinese economy continues a steady growth trend, as its

production growth rises and exports continues to improve, despite a
slight fall in the growth of retail sales and fixed asset investment.

China's Industrial Production and Fixed Asset Investment

(Ye ar-on -Ye a r % Ch an ge )
25 36

20
32

15

28

10

24
5

0 20
3 6 9 12 3 6 9 12 3 6 9 12 3 6 9 12 3 6 9
2005 2006 2007 2008 2009
In du s trial P rodu c tion (le ft) Fixe d A s s e t In ve s tm e n t(righ t)

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 In the global financial market in December, the policy stance
of low interest rates has remained unchanged among major
advanced countries, while the dollar value turned strong.
The financial market was temporarily unsettled by the possibility over
credit crisis in some European countries, but the long-term interest rates
and stock prices rose and the volatility index remained at a similar level
to the previous month.
U.S. Treasury Bond Yield and VIX CDS in Korea, China, and Russia
(%, 5-day moving average) (5-day moving average) (bp)
4.5 80 1,200

1,000
4.0
60
800
3.5

40 600

3.0
400
20
2.5
200

2.0 0 0
12 3 6 9 12 3 6 9 12 12 3 6 9 12 3 6 9 12
2007 2008 2009 2007 2008 2009
24 Treas ury Bond(left) VIX(right) K orea China Rus s ia

As the major macroeconomic indicators of the US demonstrate signs of

a recovery from sluggishness, the dollar value turns stronger against
major currencies.
Major Currency Revaluation Rate against USD and Changes in Stock Prices
(End-November vs. end-December)
(% )
15
1 2 .8

10 8 .2
8 .0
6 .0
5 .1
5
2 .6
0 .6 0 .7
0 .0
0

- 2 .7
-5 - 4 .3
- 6 .5
-10
E u ro Ja p a n C h in a R u s s ia T a iw a n K ore a

S t o c k P r ic e C h a n g e C u r r e n c y R e va lu a t io n R a t e

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