Economic Bulletin (Vol. 36 No. 11)

8/10/2019 Economic Bulletin (Vol. 36 No. 11)

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ISSN 2287-7266

Vol.36 No.11November 2014

The Green Book:Current Economic Trends

Policy IssuesKorea and China Set to Sign FTA

Measures to Stimulate Direct Won-Yuan Transactions

Economic News BriengITU Plenipotentiary Conference Held in Busan

Three-year Plan for Economic Innovation Praised at G20 MeetingKorea Ranks 5thin World Banks Doing Business Report

Korea Grows 0.9% in Q3

Statistical Appendices

Republic of Korea

c o n o m i c

u l l e t i n


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Editor-in-Chief Kim Joo-Hoon (KDI), An Il-Whan (MOSF)

Editorial Board Choi Jae-Hyuk (MOSF), Lee Seong-Pyo (KDI), Lee Jae-Yeal (KDI)

Coordinators Kim Dae-Hyun (MOSF), Lee Ji-Youn (KDI)Editors David Friedman (MOSF), Kim Seul-Ki (MOSF)

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The Green Book:

Current Economic Trends

Overview

1. External economic situation

2. Private consumption

3. Facility investment

4. Construction investment

5. Exports and imports

6. Mining and manufacturing production

7. Service sector activity

8. Employment

9. Financial markets

9.1 Stock market

9.2 Exchange rate

9.3 Bond market

9.4 Money supply & money market

10. Balance of payments

11. Prices and international commodity prices

11.1 Prices

11.2 International oil and commodity prices

12. Real estate market

12.1 Housing market

12.2 Land market

13. Composite indices of business cycle indicators

Policy IssuesKorea and China Set to Sign FTA


Economic News Brieng

Statistical Appendices

co n t e n t s


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Overview

1. External economic situation

2. Private consumption

3. Facility investment

4. Construction investment

5. Exports and imports


7. Service sector activity

8. Employment


10. Balance of payments

11. Prices and international commodity prices


13. Composite indices of business cycle indicators

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OVERVIEW

The Korean economys recovery momentum,

although employment continues to increase, has

weakened as inflation remains low and industrial

activities have been negatively affected by strikes in

the auto industry. However, the third quarter data

show that the economy has picked up from the

Sewol ferry disaster in April and recovered to the

first quarter level.

The economy continued to add jobs in September,

adding 451,000 jobs year-on-year.

Consumer price inflation remained low in October,

rising 1.2 percent year-on-year compared with 1.1

percent in the previous month.

Mining and manufacturing production rebounded by

only 0.1 percent in September from a 3.9 percent

drop in the previous month, despite increases in

mechanical equipment and primary metals, as

automobiles fell due to strikes.

Service output growth slowed in September from 0.3

percent in the previous month to 0.1 percent. Retail

sales declined month-on-month w ithout the

Chuseokholiday effect, from a 2.9 percent increase

to a 3.2 percent fall.

Facility investment in September soared month-on-

month from a 10.8 percent fall to a 13.2 percent rise

backed by strong machine ry investment.

Construction completed fell 5.8 percent from a 0.5

percent rise in the previous month, as both building

construction and civil engineering works declined.

The composite index of coincident indicators

declined for the first time in four months in

September, falling 0.2 points, and the composite

index of leading indicators rose 0.6 points.

Exports continued to grow in October, gaining 2.5

percent, backed by strong exports to the US. The

trade balance remained in the black in October,

posting a surplus of US $7.5 billion.

In October, market interest rates fell while the KOSPI

declined somewhat due to foreign investors net

selling of Korean shares. The dollar-won ratio rose

and the 100 yen-won ratio fell compared to the

previous month.

Both housing prices and Jeonse(lump-sum

deposits with no mo nthly payments) prices

continued to increase in October, rising 0.2 percent

and 0.3 percent, respectively.

The economy has continued to suffer from weak

domestic demand as consumption and investment

have yet to fully recover, while external conditions

are getting worse, such as the winding up of US QE

and the weak yen.

The Korean government will continue to closelymonitor internal and external economic trends, and

at the same time will prepare the Korean economy

for any potential risks and work to protect domestic

markets form external shocks.

The governme nt will also closely review the

implementation of reform plans, particularly the

Three-year Plan for Economic Innovation, while

continuing to focus on expediting economic recovery.

T h e G r e e n B o o k : Current Economic Trends


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US

Economic conditions and monetary policies

are sho wing a mixed trend among majorcountries. The US economy continues to recover,

but the eurozone, China and Japan are showing

sluggish growth.

Downside risks remain, such as the possibility

of an early intere st rate hike in the US and

deflation concerns in the eurozone.

1. Externaleconomic situation

US economic growth in the third quarter of 2014

(advanced estimates, annualized q-o-q) was 3.5

percent, which was substantially higher than market

expectations (3.0%). The US economy is expected to

continue on its path to recovery, with improving

consumption and investment.

Industrial production in September rose 1.0 percent

month-on-month, and the ISM Manufacturing Index,

which forecasts business sentiment, posted 59.0 in

October.

ISM Maufactuig Idx(base=50)

51.3 (Jan 2014) >53.2 (Feb) >53.7 (Mar) >54.9 (Apr) >

55.4 (May) >55.3 (Jun) >57.1 (Jul) >59.0 (Aug) >56.6

(Sep) >59.0 (Oct)

Consumption conditions have continued to improve.Although retail sales declined 0.3 percent month-on-

month in September, both the University of Michigan

Consumer Sentiment Index(86.9) and the Conference

Board Consumer Sentiment Index (94.5)rose in

October.

Uivsity f Michiga Csum Stimt Idx(1966=100)

81.2 (Jan 2014) >81.6 (Feb) >80.0 (Mar) >84.1 (Apr) >

81.9 (May) >82.5 (Jun) >81.8 (Jul) >82.5 (Aug) >84.6

(Sep) >86.9 (Oct)

Cfc Bad Csum Cfidc Idx (1985=100)

79.4 (Jan 2014) >78.3 (Feb) >83.9 (Mar) >81.7 (Apr) >

82.2 (May) >86.4 (Jun) >90.3 (Jul) >93.4 (Aug) >86.0

(Sep) >94.5 (Oct)

Home prices rose 0.2 percent month-on-month

in August, down from 0.6 percent in July. Both

new home sales (up 0.2%, m-o-m) and existing

home sales (up 2.4%, m-o-m)rose in September.

Cas-Shill Hm Pic Idx(q-o-q, m-o-m, %)

1.0 (Q4 2014) >-0.1 (Jan 2014) >0.0 (Feb) >0.9 (Mar) >1.2

(Apr) >1.1 (May) >1.0 (Jun) >0.6 (Jul) >0.2 (Aug)

nw hm sals(m-o-m, %)

-0.7 (Dec 2013) >3.4 (Jan 2014) >-5.5 (Feb) >-6.7 (Mar) >2.5

(Apr)>10.9 (May)>-8.5 (Jun)>1.9 (Jul)>18.0 (Aug)>0.2 (Sep)

Nonfarm payrolls were up 214,000 in October, downfrom 256,000 in September, while the unemployment

rate was 5.8 percent, the lowest since 2008.

nfam payll icas (m-o-m, thousands)

144 (Jan 2014)>222 (Feb)>203 (Mar)>304 (Apr)>229 (May)

>267 (Jun) >243 (Jul) >203 (Aug) >256 (Sep) >214 (Oct)

Umplymt at (m-o-m, %)

7.2 (Oct 2013) >7.0 (Nov) >6.7 (Dec) >6.6 (Jan 2014) >6.7

(Feb) >6.7 (Mar) >6.3 (Apr) >6.3 (May) >6.1 (Jun) >6.2

(Jul) >6.1 (Aug) >5.9 (Sep) >5.8 (Oct)


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-10

-8

-6

-4

-2

0

2

4

6

8

10

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

(%)

US GDP gwth ad idustial pducti

Sources: US Department of Commerce, Federal Reserve Board

GDP (q-o-q, annualized rate) Industrial production (q-o-q)

1. Preliminary 2. Annualized rate (%) 3. Seasonally adjusted

Sources: US Department of Commerce, Bloomberg

US fam payll gwth ad umplymt atSource: US Department of Labor

(Percentage change from previous period)

2012 2013 2014

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Sep

Real GDP 2.3 2.2 2.7 1.8 4.5 3.5 -2.1 4.6 3.5 -

- Personal consumption expenditure 1.8 2.4 3.6 1.8 2.0 3.7 1.2 2.5 1.8 -

- Nonresidential fixed investment 7.2 3.0 1.5 1.6 5.5 10.4 1.6 8.4 5.5 -

- Residential fixed investment 13.5 11.9 7.8 19.0 11.2 -8.5 -5.3 7.2 1.8 -

Industrial production 3.8 2.9 1.0 0.5 0.6 1.2 1.0 1.3 0.8 1.0

Retail sales 5.1 4.2 1.5 0.3 1.0 0.9 0.2 2.3 1.0 -0.3

Existing home sales 8.9 8.9 0.7 3.5 4.4 -7.1 -1.9 3.1 0.9 2.4

Unemployment rate 8.1 7.4 7.7 7.5 7.2 7.0 6.7 6.2 6.1 5.9

Consumer prices (y-o-y) 2.1 1.5 1.7 1.4 1.5 1.2 1.4 2.1 1.8 1.7

0

2

4

6

8

10

12

-1000

-800

-600

-400

-200

0

200

400

600

800

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(thousands) (%)

US nonfarm payroll growth (m-o-m, left) Unemployment rate (right)


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1. Preliminary 2. Quarterly change: average of monthly change

Source: China National Bureau of Statistics

(Percentage change from same period in previous year)

2012 2013 2014

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Aug Sep

Real GDP 7.7 7.7 7.7 7.5 7.8 7.7 7.4 7.5 7.3 - -

Industrial production 10.0 9.7 9.5 9.1 10.1 10.0 8.7 8.9 8.0 6.9 8.0

Fixed asset investment (accumulated) 20.6 19.6 20.9 20.1 20.2 19.6 17.6 17.3 15.7 16.5 15.7

Retail sales 14.3 13.1 12.4 13.0 13.3 13.5 12.0 12.3 11.9 11.9 11.6

Exports 8.3 8.6 18.9 4.2 4.0 7.5 -4.7 5.0 1.2 9.4 15.3

Consumer prices 2.6 2.6 2.4 2.4 2.8 2.9 2.3 2.2 2.0 2.0 1.6

Producer prices -1.7 -1.9 -1.7 -2.7 -1.7 -1.4 -2.0 -1.5 -1.3 -1.2 -1.8

ChinaChinas economic growth slowed from 7.5 percent in the second quarter of 2014 to 7.3 percent in the third

quarter. Exports and production improved, but consumption and investment remained poor.

Maufactuig PMI (base=50)

50.2 (Feb 2014) >50.3 (Mar) >50.4 (Apr) >50.8 (May) >51.0 (Jun) >51.7 (Jul) >51.1 (Aug) >51.1 (Sep) >50.8 (Oct)

0

10

20

30

40

50

60

70

4

6

8

10

12

14

16

18

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

(%)(%)

Chias GDP gwth ad fixd asst ivstmtSource: China National Bureau of Statistics

Fixed asset investment (accumulated, y-o-y, right)GDP (y-o-y, left)


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1. Preliminary

Sources: Japan's Cabinet Office, Ministry of Economy, Trade and Industry, Ministry of Finance, Statistics Bureau of Japan


2012 2013 2014


Real GDP 1.4 1.5 1.1 1.0 0.2 0.2 1.5 -1.8 - - -

Industrial production -0.5 0.2 0.1 -0.1 1.3 0.6 2.9 -3.8 -1.9 -1.5 2.7

Retail sales 0.0 0.2 0.1 0.4 0.4 0.1 3.9 -7.0 3.5 1.9 2.7

Exports (y-o-y) -2.8 9.7 1.2 7.1 12.8 17.4 7.0 0.1 3.2 -1.3 6.9

Consumer prices (y-o-y) -0.0 0.4 -0.6 -0.3 0.9 1.4 1.5 3.6 3.3 3.3 3.2

Japan

-25

-30

-20

-15

-10

-5

0

5

10

15

20

25

-6

-8

-4

-2

0

2

4

6

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

(%)(%)

The Japanese economy has started to shake off the impact of the consumption tax hike and showed signs of

recovery, with consumption and production improving in September.

The Bank of Japan (BOJ) announced on October 31 that it will expand its monetary stimulus. The central bank

will increase its asset buying program from 60 to 70 trillion yen a year to 80 trillion yen, by stepping up annual

purchases of long-term bonds(50 trillion yen >80 trillion yen), exchange traded funds(1 trillion yen >3 trillion

yen)and real estate investment trusts(30 billion yen >90 billion yen).

Japas GDP gwth ad idustial pductiSource: Japan's Cabinet Office, Ministry of Economy, Trade and Industry

Industrial production (q-o-q, right)GDP (q-o-q, left)


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1. Preliminary

Sources: Eurostat, Bloomberg


2012 2013 2014

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Aug Sep Oct

Real GDP -0.6 -0.4 -0.2 0.3 0.1 0.3 0.2 0.0 - - -

Industrial production -2.5 -0.7 0.3 0.6 0.0 0.5 0.2 0.0 -1.8 - -

Retail sales -1.7 -0.9 0.0 0.1 0.5 -0.4 0.6 0.3 0.9 -1.3 -

Exports (y-o-y) 7.6 1.0 1.0 1.8 0.3 1.0 1.2 0.6 -2.9 - -

Consumer prices (y-o-y) 2.5 1.4 1.9 1.4 1.3 0.8 0.7 0.6 0.4 0.3 0.4

Eurozone

The outlook for the eurozone economy is deteriorating, with the manufacturing PMI (down 1.8% in August)and

retail sales (down 1.3% in September)falling month-on-month amid persistently high unemployment (11.5% in

September) and low inflation(0.4% in October).

Maufactuig PMI(base=50)

54.0 (Jan 2014)>53.2 (Feb)>53.0 (Mar) >53.4 (Apr) >52.2 (May) >51.8 (Jun) >51.8 (Jul)>50.7 (Aug)>50.3 (Sep)>50.6 (Oct)

On November 6, the European Central Bank (ECB) kept its benchmark interest rate, deposit rate and marginal

lending rate unchanged, and ECB president Mario Draghi mentioned that the central bank will adopt additional

unconventional measures if necessary.

(%)(%)

-10

-8

-6

-4

-2

0

2

4

6

8

10

-3

-2

-1

0

1

2

3

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

euzs GDP gwth ad idustial pductiSource: Eurostat

Industrial production (q-o-q, right)GDP (q-o-q, left)


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Private consumption in the third quarter of 2014

(advanced GDP) rose 1.1 percent compared to theprevious quarter and1.6 percent compared to a

year ago.

-10

-5

0

5

10

15

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(%)

(%)

-6

-4

-2

0

2

4

6

8

10

12

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

rtail salsSource: Statistics Korea (industrial activity trends)

Pivat csumptiSource: The Bank of Korea (national accounts)

1. Preliminary 2. National accounts

Source: The Bank of Korea


2012 2013 2014

Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3

Private consumption 1.9 0.8 0.2 1.2 0.4 2.0 -0.1 0.7 1.0 0.6 0.2 -0.3 1.1

(y-o-y) - 1.7 0.7 2.6 2.7 - 1.7 2.1 2.1 2.2 2.5 1.5 1.6

Retail sales in September declined 3.2 percent compared to the previous month as declines in nondurable

goods(down 5.7%)and semi-durable goods (down 5.0%)offset gains in durable goods(up 2.8%). Compared

to a year ago, retail sales rose 1.6 percent.

Private consumption (q-o-q) Private consumption (y-o-y)

Retail sales (m-o-m) Retail sales (y-o-y)

2. Privateconsumption


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-30

-20

-10

0

10

20

30

40

50

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(y-o-y, %)

rtail sals by typ

Source: Statistics Korea (industrial activity trends)

1. Preliminary 2. Durable goods: Automobiles, electronic appliances, furniture, telecommunications devices, etc.

3. Semi-durable goods: Clothing, footwear, etc. 4. Nondurable goods: Food, medicine, cosmetics, fuel, tobacco, etc.

Source: Statistics Korea


2012 2013 2014

Annual Q3 Q4 Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Aug Sep

Retail sales - 1.4 -0.1 - -1.0 0.9 0.8 0.3 0.3 -0.5 1.4 2.9 -3.2

(y-o-y) 2.4 2.7 2.5 0.8 0.3 1.2 0.7 1.2 2.5 0.7 1.4 2.3 1.6

- Durable goods 5.3 3.2 2.1 0.3 -4.1 1.8 -0.3 0.2 4.4 -1.1 2.5 1.3 2.8

Automobiles 2.4 -4.4 12.0 2.1 -7.2 2.2 2.1 -2.1 12.0 4.6 0.5 -3.4 2.1

- Semi-durable goods -0.4 -0.1 1.1 2.0 1.4 -0.4 0.9 -0.8 -1.5 -1.3 4.4 8.7 -5.0

- Nondurable goods4 2.0 1.3 -1.8 0.6 -0.6 1.3 1.5 0.8 -1.0 0.2 -0.4 1.3 -5.7

Durable goods Nondurable goodsSemi-durable goods

In October, nondurable goods sales will recover, but sales of durable and semi-durable goods are expected tofalter due to a decline in cellphone service transfer sales and department store sales.

Cellphone service transfer sales fell in line with a lack of demand for new cellphones.

Cllph svic tasf sals(thousands, Korea Telecommunications Operators Association)

592 (Mar 2014) >398 (Apr) >890 (May) >865 (Jun) >644 (Jul) >523 (Aug) >626 (Sep) >375 (Oct)

Department store sales continued to fall, and sales at large discount stores declined at a slower pace, backed

by promotions and discounts. Credit card use continued to rise, and gasoline sales increased faster.


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Sources: Credit Finance Association of Korea, Ministry of Trade, Industry and Energy, Korea National Oil Corporation, Korea Automobile Manufacturers

Association, Ministry of Strategy and Finance (for October data)

2014Mar Apr May Jun Jul Aug Sep Oct

Credit card use 7.0 5.2 3.8 5.2 5.1 8.6 5.3 7.5

Department store sales -1.1 -1.4 0.8 -4.6 2.0 10.5 -6.3 -0.9

Large discount store sales -3.7 -4.1 1.2 -5.9 -4.6 3.2 -10.1 -0.4

Domestic sales of gasoline -0.2 -0.9 2.5 2.2 0.6 -4.5 0.6 3.9

Domestic sales of cars 0.9 10.1 3.9 7.5 0.7 -4.8 10.4 2.1

(y-o-y, %)

Facility investment (advanced GDP) fell 0.8 percent

quarter-on-quarter but rose 3.9 percent year-on-

year in the third quarter of 2014.

The facility investment index in September was up 13.2 percent month-on-month as both machinery

investment and transportation equipment investment rose. The index rose 12.7 percent year-on-year.



(Percentage change from previous quarter)

2012 2013 2014

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3

Facility investment 0.1 -1.5 1.5 1.0 2.7 5.6 -1.9 1.1 -0.8

(y-o-y) - - -12.7 -3.9 1.5 10.9 7.3 7.7 3.9

- Machinery 0.3 -3.5 -2.6 4.4 6.5 3.7 -4.9 0.2 -

- Transportation equipment -0.4 4.0 11.3 -6.4 -6.5 10.7 5.5 3.1 -

-30

-20

-10

0

10

20

30

40

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

(%)

Facility ivstmtSource: The Bank of Korea (national accounts)

Facility investment (q-o-q) Facility investment (y-o-y)

3. Facilityinvestment


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Facility investment is likely to falter due to a slowdown in business sentiment.

Busiss suvy idx f maufactuig sct(Bank of Korea)

81 (Feb 2014) >85 (Mar) >86 (Apr) >86 (May) >81 (Jun) >78 (Jul) >75 (Aug) >74 (Sep) >78 (Oct) >74 (Nov)

(y-o-y, %)

-30

-20

-10

0

10

20

30

40

50

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

Facility ivstmt by typSource: The Bank of Korea (national accounts)

MachineryTransportation equipment

-50

-40

-30

-20

-10

0

10

20

30

40

5060

70

2

3

4

5

6

7

8

9

10

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

(trillion won) (y-o-y, %)

Ladig idicats f facility ivstmtSources: Statistics Korea (machinery orders), Korea International Trade Association (machinery imports)

Machinery orders (left) Machinery imports (right)

1. Preliminary



2012 2013 2014Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Aug Sep

Facility investment index -2.8 -1.3 -3.1 1.1 5.0 5.9 -5.2 2.1 -1.0 -10.8 13.2

(y-o-y) - - -13.1 -4.0 2.7 10.4 5.9 6.2 1.4 -9.9 12.7

- Machinery -2.7 -2.6 -3.5 2.9 4.5 7.3 -8.6 1.5 -0.6 -5.9 12.6

- Transportation equipment -3.0 2.3 -2.0 -4.0 6.4 2.5 4.7 3.4 -2.2 -21.0 14.6


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-10

-5

0

5

10

15

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 14.1Q

(%)

Cstucti ivstmtSource: The Bank of Korea (national accounts)

Construction investment (advanced GDP)in the

third quarter of 2014 rose 2.9 percent quarter-on-

quarter and 3.0 percent year-on-year.

Construction investment (q-o-q) Construction investment (y-o-y)

1. Preliminary 2. Production growth rate minus production capacity growth rate in the manufacturing sector (%p)

Sources: Statistics Korea, Korea International Trade Association


2012 2013 2014Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Aug Sep

Domestic machinery orders -13.9 6.7 -11.4 8.8 2.2 32.4 17.9 4.4 50.2 152.3 15.4

(q-o-q, m-o-m) - - 6.8 3.9 -6.9 27.7 -2.8 -9.6 38.2 139.4 -55.9

-Public -11.0 20.6 -47.0 94.2 -9.7 129.7 184.6 -45.0 418.5 2,653.2 10.6

-Private -14.2 5.2 -6.1 4.0 3.8 22.1 4.1 9.6 8.6 1.6 15.7

Machinery imports -3.0 6.5 -11.8 -2.1 6.8 13.2 2.4 11.8 1.6 -15.2 12.6

Average manufacturing operation ratio 78.5 76.2 77.3 75.9 75.1 76.6 77.2 76.3 75.8 74.0 75.2

Facility investment adjustment pressure -0.7 -1.4 -2.6 -1.6 -1.7 0.1 -0.6 -0.9 -0.3 -4.2 0.4




2012 2013 2014

Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3

Construction investment -3.9 6.7 6.5 4.6 0.2 -5.2 5.1 0.4 2.9

(y-o-y) - - 1.9 9.8 8.8 5.4 4.3 0.2 3.0

- Building construction -1.6 8.8 5.4 7.2 0.5 -4.0 5.1 2.3 -

- Civil engineering works -7.1 3.7 8.1 1.0 -0.1 -6.9 5.1 -2.5 -

4. Constructioninvestment


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4(y-o-y, %)

-30

-20

-10

0

10

20

30

40

2004.Q1 2005.Q1 2006.Q1 2007.Q1 2008.Q1 2009.Q1 2010.Q1 2011.Q1 2012.Q1 2013.Q1 2014.Q1

Cstucti ivstmt by typSource: The Bank of Korea (national accounts)

Building construction Civil engineering worksResidential buildings

The value of construction completed (constant)in September declined 5.8 percent month-on-month as

building construction and civil engineering works both decreased. The index fell 3.9 percent year-on-year.

Construction investment is expected to improve, led by a decrease in unsold houses and an increase in new

apartment supplies.

Usld huss (thousands, Ministry of Land, Infrastructure and Transport)

59 (Jan 2014) >52 (Feb) >48 (Mar) >46 (Apr) >49 (May) >50 (Jun) >51 (Jul) >45 (Aug) >42 (Sep)

nw apatmt supplis(thousands, Ministry of Land, Infrastructure and Transport)

6 (Jan 2014) >11 (Feb) >24 (Mar) >39 (Apr) >39 (May) >29 (Jun) >18 (Jul) >23 (Aug) >49 (Sep) >6.1 (Oct)

1. Preliminary



2012 2013 2014


Construction completed (constant) -5.0 10.1 3.5 6.3 -0.1 -0.7 1.5 0.2 -3.2 0.5 -5.8

(y-o-y) - - 4.4 15.0 10.5 9.7 6.5 0.1 -1.9 -0.9 -3.9

- Building construction -6.6 14.8 5.6 7.7 0.4 2.9 6.0 2.9 -5.4 0.3 -6.2

- Civil engineering works -3.0 4.3 1.0 4.6 -0.9 -5.5 -5.0 -4.1 0.5 1.0 -5.2

1. Preliminary

Sources: Statistics Korea, Ministry of Land, Infrastructure and Transport


2012 2013 2014


Construction orders (current value) -6.2 -15.3 -40.8 -29.5 -10.6 22.4 15.5 26.1 44.3 81.3 36.8

(q-o-q, m-o-m) - - -2.2 0.3 16.8 2.9 -1.4 10.5 30.4 59.5 -25.1

- Building construction -4.7 -13.4 -34.0 -29.6 -10.8 17.9 10.7 47.0 63.1 130.2 54.2

- Civil engineering works -9.1 -19.2 -50.4 -29.4 -10.0 33.4 24.4 -11.2 -4.6 -32.1 1.7

Building permit area -0.5 -7.3 -12.4 -14.6 -3.4 -0.2 18.4 21.6 14.7 27.7 7.9


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ook

-110

-60

-10

40

90

140

190

240

290

340

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(y-o-y, %)

Ladig idicats f cstucti ivstmt

Sources: Statistics Korea (construction orders), Ministry of Land, Infrastructure and Transport (building permit area)

1. Preliminary

Source: Korea Customs Service

(US $ billion)

2013 2014

Annual Q1 Q2 Q3 Q4 Oct Q1 Q2 Q3 Sep Oct

Exports 559.63 135.32 141.16 136.79 146.37 50.48 137.56 145.70 142.11 47.75 51.75

(y-o-y, %) 2.1 0.3 0.7 2.8 4.7 7.2 1.7 3.2 3.9 6.9 2.5

Average daily exports 2.05 2.02 2.06 2.00 2.11 2.19 2.07 2.19 2.07 2.27 2.25

Exports in October increased 2.5 percent(preliminary)

year-on-year to US $51.75 billion.

Exports continued to increase, backed by robust

shipments to the US and strong exports of steel and

vessels, but at a slower pace compared to the

previous month.

By item, vessel and semiconductor exports surged,

while automobile and mobile phone exports declined.By region, shipments to the US and China continued

to rise, while shipments to the EU and Japan fell.

Construction orders Building permit area

5. Exports andImports

expt gwth by itm (y-o-y, %)

7.7 (steel), 35.1 (vessels), 12.2 (semiconductors), -13.9

(automobiles), 4.3 (petroleum products), -16.3 (mobilephones)

expt gwth by gi(y-o-y, %)

25.0 (US), -8.6 (EU), -1.4 (Japan), 0.3 (ASEAN countries),

3.7 (China)

Average daily exports, an indicator adjusted to days

worked, was up 2.5 percent year-on-year, posting

US $2.25 billion in October.

Avag daily xpt gwth(y-o-y, %)8.8 (Jan 2014)>-3.3 (Feb)>1.5 (Mar)>8.9 (Apr) >5.4 (May)

>4.9 (Jun) >5.2 (Jul) >4.1 (Aug) >1.8 (Sep) >2.5 (Oct)


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-80

-60

-40

-20

0

20

40

60

80

100

120

140

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(y-o-y, %)

expts by itm

Sources: Korea Customs Service, Ministry of Trade, Industry and Energy (export and import trends)

Export growth rate Semiconductors Automobiles Steel

Imports in October fell 3.0 percent (preliminary)year-on-year to US $44.25 billion.

Imports of commodities declined due to falling oil prices and supplies, while imports of capital goods declined

due to sluggish investment and a high base effect.

Impt gwth by catgy(y-o-y, %)

-2.8 (commodities), -8.2 (capital goods), 9.0 (consumer goods)

-80

-60

-40

-20

0

20

40

60

80

100

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(y-o-y, %)

Impts by itmSources: Korea Customs Service, Ministry of Trade, Industry and Energy (export and import trends)

Import growth rate Commodities Capital goods

1. Preliminary


(US $ billion)

2013 2014


Imports 515.58 129.73 126.76 126.03 133.06 45.60 132.34 130.82 133.05 44.32 44.25

(y-o-y, %) -0.8 -2.9 -2.8 0.3 2.5 5.1 2.0 3.2 5.6 8.0 -3.0

Average daily imports 1.89 1.94 1.85 1.84 1.91 1.98 1.99 1.97 1.94 2.11 1.92


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70

-10

0

10

20

30

40

50

60

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(US$ billion)

expts ad impts

Sources: Korea Customs Service, Ministry of Trade, Industry and Energy (export and import trends)

Trade balance Exports Imports

The trade balance(preliminary)in October remained in the black for the 33thconsecutive month, posting a

surplus of US $7.50 billion.

1. Preliminary


(US $ billion)

2013 2014


Trade balance 44.05 5.59 14.40 10.76 13.30 4.87 5.21 14.88 9.06 3.43 7.50

Mining and manufacturing production rose 0.1

percent month-on -month in September, asdecl ines in semiconductors & par ts and

automobiles were offset by gains in mechanical

equipment and primary metals. Compared to

the same period in the previous year, the index

was up 1.9 percent.

Compared to the previous month, production of

mechanical equipment(up 6.4%), primar y

metals (up 2.6%) and electrical equipment(up

4.4%)rose, while production of automobiles

(down 5.8%) declined due to auto wo rkerstrikes.

Compared to a year ago, production of primary

metals (up 8.4%), mechanical equipment (up

7.8%) and processed metals(up 8.8%)rose,

while semiconductors & parts(down 4.7%),

other transportation equipment (down 5.5%) and

medical, precision & optical instruments (down

7.5%)declined.



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-30

-20

-10

0

10

20

30

40

50

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(%)

Idustial pducti


Industrial production (m-o-m) Industrial production (y-o-y)

The manufacturing inventory-shipment ratio rose 0.9 percentage points month-on-month to 123.8

percent as inventories rose 0.7 percent and shipments fell 0.1 percent.

Inventories of refined petroleum (up 8.1%), mechanical equipment(up 3.6%) and electrical equipment(up

6.1%) rose, while semiconductors & parts (down 6.4%), primary metals(down 1.1%) and processed

metals(down 2.4%) declined.

Shipments of mechanical equipment(up 4.9%), primary metals(up 3.1%)and other transportation

equipment(up 4.8%) rose, while semiconductors & parts(down 3.8%), refined petroleum(down 3.6%) and

automobiles(down 2.0%)fell.

The average operation ratio of the manufacturing sector rose 1.2 percentage points month-on-month to

75.2 percent.

1. Preliminary 2. Including mining, manufacturing, electricity and gas industry

3. End-period 4. Percentage change from same period in previous year



2013 2014

Annual Q1 Q2 Q3 Q4 Sep Q1 Q2 Q3 Aug Sep

Mining andmanufacturingactivity

Mining production (q-o-q, m-o-m) - -0.5 -0.9 0.1 1.9 -2.1 0.3 -0.9 -0.2 -3.9 0.1

(y-o-y) 0.3 -0.8 0.0 0.2 1.7 -3.8 0.7 0.3 1.1 -2.8 1.9

Manufacturing production (q-o-q, m-o-m) - -0.4 -1.0 0.0 2.1 -2.2 0.4 -1.1 -0.2 -3.9 0.0

(y-o-y) 0.3 -0.8 0.0 0.1 1.8 -4.1 0.6 0.3 1.2 -2.7 2.0

Shipment 0.4 -0.3 -0.6 -0.1 1.7 -2.1 -0.1 -0.6 -0.6 -2.6 -0.1

- Domestic demand -1.4 -1.7 -1.1 1.6 1.7 -2.8 0.0 -0.3 -0.9 -4.4 0.3- Exports 2.3 1.6 -0.2 -2.0 1.6 -1.3 -0.1 -0.8 -0.4 -0.6 -0.4

Inventory 5.0 -0.6 -2.1 5.7 2.4 2.3 -0.5 -0.2 1.7 -1.8 0.7

Manufacturingactivity

Average operation ratio (%) 76.2 77.3 75.9 75.1 76.5 74.3 77.2 76.3 75.8 74.0 75.2

Production capacity4 1.7 1.8 1.6 1.8 1.7 1.9 1.2 1.2 1.5 1.5 1.6


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Gr

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-12

-10

-8

-6

-4

-2

0

2

4

6

8

10

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(m-o-m, %)

Shipmt ad ivty


Shipment growth Inventory growth

Mining and manufacturing production will continue to recover in October as auto workers ended strikes, but

growing external uncertainies may hamper the recovery momentum.

50

60

70

80

90

100

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(%)

Avag maufactuig pati atiSource: Statistics Korea (industrial activity trends)

7. Service sector activityService output in September rose 0.1 percent month-on-month, as declines in financial & insurance services

and wholesale & retail were offset by gains in entertainment, cultural & sports services and hotels &

restaurants. Compared to the same period of the previous year, service output increased 2.8 percent.

Service output rose, led by transportation services (up 0.6%, m-o-m), hotels & restaurants (up 3.1%, m-o-m),

entertainment, cultural & sports services(up 7.9%, m-o-m), and real estate & renting (up 3.6%, m-o-m).

Wholesale & retail(down 0.6%, m-o-m) fell as sales at department stores and large discount stores

declined in the absence of the Chuseokholiday effect, while professional, scientific & technical services

(down 1.5%, m-o-m) continued to fall.


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-10

-5

0

5

10

15

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(%)

Svic sct activity


Service sector activity (m-o-m) Service sector activity (y-o-y)

Transportationservices

Publishing &communications

services

Businessservices

Educationservices

Health &social welfare

services

Entertainment,cultural &

sports services

Membershiporganizations &

personal services

Hotels &restaurants

Sewerage &waste

management

Real estate& renting

Total index

Wholesale& retail

Professional,scientific &technicalservices

-8

-6

-4

-2

0

2

4

6

8

10

12(y-o-y, %)

Financial &insurance services

Sptmb 2014 svic utput by busiss


Wholesale & retail (m-o-m) Wholesale & retail (y-o-y)

Whlsal & tailStatistics Korea (industrial activity trends)

-10

-5

0

5

10

15

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(%)


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2

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Service output in October will be affected by positive factors, such as increasing stock transactions and the

recovering real estate market, and also by negative factors, such as a decline in sales at department stores.

Avag daily stck tasactis (trillion won)

5.5 (Jan 2014) >5.4 (Feb) >5.6 (Mar) >5.6 (Apr) >5.5 (May) >5.4 (Jun) >6.0 (Jul) >6.3 (Aug) >6.6 (Sep) >6.8 (Oct)

1. Preliminary



Weight 2012 2013 2014Annual Annual Q1 Q2 Q3 Q4 Q1 Q2 Q3 Aug Sep

Service activity index 100.0 1.6 1.4 0.2 0.4 0.2 0.9 0.5 0.0 1.1 0.3 0.1

- Wholesale & retail 21.6 0.8 -0.2 -0.8 0.1 -0.1 0.6 0.1 -0.4 -0.1 1.3 -0.6

- Transportation services 8.5 1.2 1.1 0.7 0.1 -1.0 0.6 1.1 -0.3 1.5 -0.7 0.6

- Hotels & restaurants 7.2 -1.2 0.4 0.1 0.6 2.7 -0.9 -1.6 -2.1 5.5 0.0 3.1

- Publishing & communications services 8.4 3.0 1.9 0.6 -1.0 0.9 3.4 -2.0 0.8 -0.3 0.4 1.3

- Financial & insurance services 14.7 2.8 0.5 -0.1 -1.1 -0.5 0.6 2.7 1.4 1.5 0.9 -1.2

- Real estate & renting 5.3 -4.8 2.5 -2.2 7.4 -3.6 3.6 -3.2 7.6 -1.3 1.0 3.6

- Professional, scientific & technical services 5.6 3.7 3.3 0.2 4.9 -2.9 0.7 0.4 3.0 -2.8 -3.9 -1.5

- Business services 3.3 3.5 2.2 1.6 -0.4 1.6 0.4 1.6 -0.5 0.8 0.9 0.5

- Education services 10.9 0.9 0.8 0.8 -1.0 1.2 0.7 1.1 -2.3 1.5 2.8 -3.4

- Healthcare & social welfare services 7.5 6.7 5.0 0.8 1.1 2.5 1.6 1.5 0.4 2.0 2.0 1.9

- Entertainment, cultural & sports services 2.9 2.8 -0.5 1.7 0.6 0.2 -0.2 1.4 -6.8 7.9 -5.3 7.9

- Membership organizations & personal services 3.6 -1.4 5.3 3.1 -0.7 3.5 0.2 0.1 -3.5 3.4 -3.4 -2.5

- Sewerage & waste management 0.6 -0.6 -0.4 0.5 0.6 0.9 1.2 0.2 -1.4 1.9 -2.0 -1.6

8. EmploymentThe number of workers on payroll in September increased by 451,000 from a year earlier to 25,920,000 and

the employment rate rose 0.4 percentage points to 60.8 percent.

By industry, employment in services and manufacturing continued to grow, but at a slower pace.

By employment status, regular workers continued to lead employment growth, while temporary and daily

workers grew slowly. Self-employed workers increased for the second consecutive month.


24/72


2010 2011 2012 2013 2014

Annual Annual Annual Annual Q1 Q2 Q3 Q4 Sep Q1 Q2 Q3 Aug Sep

Number of employed (millions) 23.83 24.24 24.68 25.07 24.18 25.33 25.41 25.35 25.47 24.91 25.79 25.93 25.89 25.92

Employment rate (%) 58.7 59.1 59.4 59.5 57.7 60.2 60.3 60.0 60.4 58.8 60.8 60.9 60.8 60.8

(Seasonally adjusted) 58.7 59.1 59.4 59.5 59.2 59.4 59.7 59.9 59.8 60.4 59.9 60.3 60.5 60.3

Employment growth (y-o-y, thousands) 323 415 437 386 257 324 421 541 463 729 464 517 594 451

(Excluding agriculture, forestry & fisheries) 405 440 451 394 266 351 402 556 437 717 518 638 719 579

- Manufacturing 191 63 14 79 119 122 26 49 21 123 136 194 219 173

- Construction 33 -2 22 -19 -64 -6 4 -9 7 27 12 57 64 51

- Services 200 386 416 318 199 212 354 507 397 570 387 403 453 367

- Agriculture, forestry & fisheries -82 -25 -14 -8 -9 -27 19 -15 26 12 -54 -121 -125 -128

- Wage workers 517 427 315 483 329 472 526 604 567 711 485 519 536 489

Regular workers 697 575 436 615 554 638 632 637 597 606 478 333 323 324

Temporary workers -34 -78 -2 -96 -152 -169 -65 2 -24 74 118 226 242 201

Daily workers -146 -70 -120 -37 -73 3 -42 -35 -6 31 -111 -40 -28 -37

- Nonwage workers -194 -11 121 -97 -71 -148 -105 -63 -104 19 -22 -3 57 -38

Self-employed workers -118 1 124 -67 -28 -104 -83 -54 -79 -7 -14 19 57 18

- Male 181 238 234 186 123 179 179 262 206 373 228 268 294 222

- Female 142 177 203 200 135 145 242 279 257 357 236 249 300 229

- 15 to 29 -43 -35 -36 -50 -117 -88 -41 46 38 97 53 102 147 52

- 30 to 39 -4 -47 -31 -21 -15 8 -34 -42 -30 -6 -42 -7 -5 -32

- 40 to 49 29 57 11 22 12 -6 30 53 13 99 34 15 19 27

- 50 to 59 294 291 270 254 196 254 279 285 264 323 227 215 235 206

- 60 or more 47 149 222 181 181 156 187 200 178 218 192 192 199 198


21

22

22

23

23

24

24

25

25

26

26

27

-400

-200

0

200

400

600

800

1,000

1,200

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(thousands) (millions)

numb f pss mplyd ad mplymt gwth

Source: Statistics Korea (employment trends)

Employment growth (y-o-y, left) Number of employed (seasonally adjusted, right)


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emplymt at


56

57

58

59

60

61

62

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(%)

Original data Seasonally adjusted rate

6.5 7.0 7.0 6.8 6.8 6.8 6.9 6.5 4.9 4.3 4.6 5.6 6.3 6.7 6.9 6.7 6.8 6.8 6.9 6.2 4.7 4.4 4.5 5.3 6.1 6.4 6.5 6.2 6.2 6.2

16.3 16.2 16.3 16.4 16.5 16.6 16.7 16.9 17.1 17.4 17.3 16.9 16.716.4 16.4 16.4 16.3 16.4 16.5 16.7 17.1 17.3 17.2 17.0 16.7 16.8 16.8 16.8 16.7 16.8

7.2 7.2 7.2 7.1 7.1 7.1 7.3 7.2 7.2 6.9 6.7 6.9 7.1 7.1 7.1 7.0 6.9 7.0 7.1 7.0 7.0 6.8 6.7 6.8 6.9 7.1 7.1 7.1 7.0 7.1

69.7 69.2 69.1 69.3 69.2 69.0 68.7 69.0 70.4 70.9 71.1 70.2 69.4 69.2 69.1 69.4 69.6 69.4 69.1 69.7 70.8 71.1 71.2 70.6 69.7 69.4 69.3 69.6 69.7 69.6

0

20

40

60

80

100

2012.4 5 6 7 8 9 10 11 12 2013.1 2 3 4 5 6 7 8 9 10 11 12 2014.1 2 3 4 5 6 7 8 9

emplymt by idustySource: Statistics Korea (employment trends)

Services Construction Manufacturing Agriculture, forestry & fisheries

20.6 20.5 20.3 20.2 19.9 19.8 19.8 19.920.0 19.9 19.7 19.5 19.5 19.5 19.5 19.6 19.2 19.4 19.4 19.5 19.5 19.2

19.4 19.6 19.7 19.7 19.5 20.1 19.7 19.8

6.6 6.8 6.7 6.7 6.4 6.4 6.7 6.8 6.66.2 6.0 6.0 6.5 6.7 6.7 6.3 6.1 6.3 6.5 6.4 6.4 6.3 6.0 5.7 6.0 6.1 6.1 6.0 5.8 6.1

23.4 23.3 23.2 23.4 23.3 23.2 23.1 22.9 22.7 22.7 22.8 23.0 22.8 22.6 22.5 22.6 22.7 22.5 22.4 22.2 21.9 22.1 22.0 22.3 22.2 22.1 22.1 22.1 22.4 22.2

5.1 5.4 5.4 5.3 5.3 5.4 5.3 5.2 4.5 4.2 4.2 4.7 5.0 5.0 5.2 5.1 5.2 5.2 5.3 5.1 4.3 4.2 4.3 4.6 4.8 5.0 5.0 5.0 5.0 4.9

0

20

40

60

80

100

2012.4 5 6 7 8 9 10 11 12 2013.1 2 3 4 5 6 7 8 9 10 11 12 2014.1 2 3 4 5 6 7 8 9

44.3 44.0 44.4 44.4 45.1 45.2 45.1 45.2 46.2 46.947.3 47.0 46.3 46.2 46.1 46.4 46.8 46.7 46.5 46.9 47.8 48.3 48.2 47.8 47.3 47.1 47.2 46.8 47.0 47.1

emplymt by status f wksSource: Statistics Korea (employment trends)

Unpaid family workers Self-employed workers Daily workers Temporary workers Regular workers


26/72


4


2010 2011 2012 2013 2014

Annual Annual Annual Annual Q1 Q2 Q3 Q4 Sep Q1 Q2 Q3 Aug SepNumber of unemployed (thousands) 920 855 820 807 907 812 777 733 720 1,031 977 884 890 849

Unemployment growth (y-o-y, thousands) 31 -65 -35 -13 -40 -29 7 11 -32 125 165 107 107 129

- Male -7 -48 -26 -6 -7 -20 11 -7 -21 40 62 37 41 72

- Female 38 -17 -9 -7 -33 -9 -4 18 -11 84 103 70 66 57

Unemployment rate (%) 3.7 3.4 3.2 3.1 3.6 3.1 3.0 2.8 2.7 4.0 3.7 3.3 3.3 3.2


-15 to 29 8.0 7.6 7.5 8.0 8.4 7.9 7.9 7.9 7.7 9.8 9.4 8.6 8.4 8.5

- 30 to 39 3.5 3.4 3.0 3.0 3.3 3.0 2.9 2.6 2.5 3.2 3.4 3.0 3.1 2.8

- 40 to 49 2.5 2.1 2.0 2.0 2.1 2.1 1.9 1.7 1.7 2.3 2.4 2.1 2.2 2.0

- 50 to 59 2.5 2.1 2.1 1.9 2.3 1.8 1.8 1.5 1.7 2.2 2.3 2.1 2.2 2.1

- 60 or more 2.8 2.6 2.4 1.8 3.4 1.6 1.2 1.4 1.2 4.4 1.9 1.5 1.6 1.5

The economically inactive population in September was down 163,000 from a year earlier to 15,850,000, while

the labor force participation rate rose 0.7 percentage points to 62.8 percent.

The number of those economically inactive due to old age (up 98,000, y-o-y)and disabilities (up 13,000, y-o-y)

increased, while those due to housework(down 110,000, y-o-y), education (down 74,000, y-o-y), and rest(down

64,000, y-o-y) decreased.

The number of unemployed persons in September increased by 129,000 year-on-year to 850,000, and the

unemployment rate rose 0.5 percentage points to 3.2 percent. The unemployment rate rose in all age groups.

Umplymt atSource: Statistics Korea (employment trends)

(%)

2

3

4

5

6

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1



27/72

25

Th

Gr

B

ook

58

59

60

61

62

63

64

65

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(%)

Lab fc paticipati at




2010 2011 2012 2013 2014

Annual Annual Annual Annual Q1 Q2 Q3 Q4 Sep Q1 Q2 Q3 Aug Sep

Economically inactive population (millions) 15.84 15.95 16.08 16.22 16.83 15.91 15.98 16.17 16.01 16.40 15.69 15.76 15.80 15.85

Labor force participation rate (%) 61.0 61.1 61.3 61.5 59.9 62.2 62.1 61.7 62.1 61.3 63.1 63.0 62.9 62.8


Growth in economically inactivepopulation (y-o-y, thousands) 143 112 128 141 336 242 78 -91 66 -433 -226 -222 -298 -163

- Childcare -125 -5 -2 1 0 10 9 -14 -2 -29 -57 -41 -38 -29

- Housework 201 101 123 -3 143 36 -80 -112 -61 -230 -127 -99 -140 -110

- Education 12 -51 -12 77 118 147 88 -44 1 -76 -68 -109 -141 -74

- Old age 80 -45 148 54 154 7 32 21 39 81 113 91 80 98

- Rest -56 182 -53 -7 -106 44 12 21 93 -197 -90 -65 -61 -64


9.1 Stock marketThe KOSPI in October fell 55.7 points to 1,964 points from 2,020 points in the previous month. The KOSPI

declined due to concerns over a global economic slowdown, poor corporate earnings and foreigners net

selling of Korean shares. Net selling by foreign investors continued for 11 consecutive trading days.

Despite falling stock prices and foreign investors net selling, the volume of stock transactions increased and

the foreign stock ownership ratio also rose.


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9.2 Exchange rateThe dollar-won exchange rate in October rose 13.3

won to 1,068.5 won from 1,055.2 won at the end of

September. The dollar-won exchange rate rose as

the yen weakened following additional stimulus

measures from the BOJ, and also as the US Fed

announced an end to its quantitative easing

program.

The 100 yen-won exchange rate declined from

965.0 won in September to 963.1 won in October, as

the yen remained weak due to the BOJs additional

stimulus measures.

(month-end,)

600

800

1,000

1,200

1,400

1,600

1,800

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

Fig xchag ats

Dollar-Won 100 Yen-Won

1. Change from the end of the previous month

Source: Korea Exchange

(Closing rate)

KOSPI KOSDAQ

Sep 2014 Oct 2014 Change Sep 2014 Oct 2014 Change

Stock price index (points) 2,020.1 1,964.4 -55.7 (-2.8%) 573.2 558.7 -14.5 (2.5%)

Market capitalization (trillion won) 1,205.7 1,176.1 -29.6 (-2.5%) 140.2 143.5 3.3 (2.4%)

Average daily trade value (trillion won) 4.2 4.5 0.3 (7.1%) 2.3 2.3 -

Foreign stock ownership (%, %p) 35.0 35.2 0.2 (0.6%) 10.9 11.0 0.1 (0.9%)

200

0

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(monthly average)

Stck pics

KOSPI KOSDAQ


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1. Appreciation from the end of the previous year (%); the exchange rate is based on the closing price at 3:00 p.m., local time.

(Closing rate)

2008 2009 2010 2011 2012 2013 2014

Dec Dec Dec Dec Dec Dec Sep Oct Change

Dollar-Won 1,259.5 1,164.5 1,134.8 1,151.8 1,070.6 1,055.4 1,055.2 1,068.5 -1.2

100 Yen-Won 1,396.8 1,264.5 1,393.6 1,481.2 1,238.3 1,002.3 965.0 963.1 4.1

(monthly average, yearly, %)

1

2

3

4

5

6

7

8

9

10

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

Itst atsSource: The Bank of Korea

Overnight call rate (daily) 3-yr corporate bond yield3-yr Treasury bond yield

2009.1 7 7 7 7 7 72010.1 2011.1 2012.1 2013.1 2014.1

()

800

1,000

1,200

1,400

1,600

1,800

Dollar-Won 100 Yen-Won

Daily fig xchag at td

3-year Treasury bond yields fell from 2.30 percent

in September to 2.14 percent in October. Treasury

bond yields fell due to additional stimulus

measures by the BOJ.

9.3 Bond market


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(y-o-y, monthly average balance, %)

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0

10

20

30

40

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

Ttal my supplySource: The Bank of Korea

Reserve money LfM1

1. Balance at end August 2014, trillion won

2. M1 excluding corporate MMFs and individual MMFs while including CMAs

3. Liquidity aggregates of financial institutions (mostly identical with M3)

(Percentage change from same period in previous year, average)

2009 2010 2011 2012 2013 2014

Annual Annual Annual Annual Annual Jun Jul Aug Aug

M1 16.3 11.8 6.6 3.8 9.5 9.3 9.2 11.9 538.6

M2 10.3 8.7 4.2 5.2 4.8 6.1 6.5 7.6 2,031.8

Lf 7.9 8.2 5.3 7.8 6.9 6.7 6.9 7.3 2,744.0

M2(monthly average) in August rose 7.6 percent

from a year earlier. M2 grew faster compared to the

previous month, as money supply in the private

sector expanded due to rising household debt, and

also as money supply in the public sector rose due

to government surplus funds.

9.4 Money supply &money market

(Closing rate, %)

1. Basis point, changes from the previous month

2009 2010 2011 2012 2013 2014Dec Dec Dec Dec Dec Jul Aug Sep Oct Change

Call rate (1 day) 2.01 2.51 3.29 2.77 2.52 2.49 2.24 2.24 1.97 -27

CD (91 days) 2.88 2.80 3.55 2.89 2.66 2.65 2.40 2.35 2.14 -21

Treasury bonds (3 yrs) 4.44 3.38 3.34 2.82 2.86 2.52 2.51 2.30 2.14 -16

Corporate bonds (3 yrs) 5.56 4.27 4.21 3.29 3.29 2.92 2.88 2.68 2.49 -19

Treasury bonds (5 yrs) 4.98 4.08 3.46 2.97 3.23 2.76 2.74 2.50 2.29 -21


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0

10

20

30

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(y-o-y, end of month balance, trillion won)

Dpsits i fiacial istitutisSource: The Bank of Korea

1. Balance at end September 2014, trillion won

(Change from previous period, end-period, trillion won)

2009 2010 2011 2012 2013 2014

Dec Dec Dec Dec Dec Jun Jul Aug Sep Sep

Bank deposits 54.8 36.9 58.9 37.0 41.0 9.3 -8.8 7.8 3.7 1,210.3

AMC deposits -27.6 -16.7 -16.6 18.8 17.7 -1.1 11.5 5.4 2.7 365.9

Koreas current account (preliminary) in September

posted a surplus of US $7.62 billion, staying in the

black for 31 consecutive months.

The current account surplus expanded from

US $7.20 billion in August to US $7.62 billion in

September, as the goods account surplus expanded

while the services account deficit contracted.

Gds xpts(US $ billion)

48.92 (Aug 2014) >50.98 (Sep)

Gds impts(US $ billion)

41.55 (Aug 2014) >43.25 (Sep)

10. Balance ofpayments

Bank deposits grew slower in September, led by

instant access deposits (12.6 trillion won >3.9 trillionwon), due to tax payments and fund withdrawals by

corporations in order to meet required debt levels

at the end of the quarter.

Asset management company (AMC) deposit growth

also slowed, led by money market funds (MMF) (5.7trillion won >-0.5 trillion won), as corporations

withdrew funds to lower their debt ratios.


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-6

-4

-2

0

2

4

6

8

10

12

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(US$ billion)

Cut accut balacSource: The Bank of Korea (balance of payments trends)

1. Preliminary


(US $ billion)2013 2014

Annual Q1 Q2 Q3 Q4 Sep Q1 Q2 Q3 Sep

Current account 79.88 10.46 20.80 23.78 24.84 8.60 15.07 24.13 22.66 7.62

- Goods balance 80.57 12.08 20.00 23.88 24.62 8.59 17.75 26.42 21.89 7.73

- Service balance -7.93 -3.51 -0.41 -2.06 -1.94 -0.20 -3.62 -1.95 -1.02 -0.28

- Primary income balance 11.42 2.78 1.84 3.16 3.64 0.85 1.91 1.33 3.14 0.61

- Secondary income balance -4.18 -0.89 -0.62 -1.19 -1.48 -0.64 -0.96 -1.68 -1.35 -0.43

Goods account Services account Current account

Compared to the same period of the previous year,

the current account surplus expanded by US $0.07billion.

Impt gwth by catgy(y-o-y, %)

8.0 (total), 4.9 (commodities), 8.0 (capital goods), 23.4

(consumer goods)

expt gwth by itm(y-o-y, %)

6.9 (total), -3.7 (mobile phones), 29.1 (steel), 7.0

(automobiles), -3.2 (petroleum products), 7.4

(semiconductors), 23.7 (vessels)

The services account deficit contracted from

US $0.73 billion to US $0.2 8 billion as the

travel and construction accounts improved.

Svicsaccut (US $ billion, August >September)

-0.37>-0.38 (manufacturing), 0.64>0.22 (transportation),

-0.77 >-0.21 (travel), 0.84 >1.11 (construction), -0.38 >

-0.27 (intellectual property rights), -0.83 >-1.04 (other

businesses)

The primary income account surplus contracted

from US $1.05 billion to US $0.61 billion due to a

rise in dividend payments, while the secondary

income account deficit contracted from US $0.49

billion to US $0.43 billion.


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The capital and financial account (preliminary)in

September posted a net outflow of US $8.76 billion.

Capital & fiacial accut balac(US $ billion)

-4.48 (Jan 2014) >-6.92 (Feb) >-5.78 (Mar) >-6.24 (Apr)

>-8.13 (May) >-9.84 (Jun) >-5.93 (Jul) >-7.79 (Aug) >

-8.76 (Sep)

Net outflows of direct investment expanded from

US $0.75 billion to US $2.15 billion as overseas

direct investment increased.

Portfolio investment switched to a net outflow of

US $3.52 billion from a net inflow of US $0.50 billion

due to foreign investors net selling of Korean shares.

Net inflows of financial derivatives investment

contracted from US $0.56 billion to US $0.47

billion, while net outflows of other investment

contracted from US $7.29 billion to US $1.88 billion

as financial institutions collected overseas debt and

withdrew overseas deposits.

The current account surplus is expected to expand

in October, considering the growing surplus in the

trade account.

-15

-10

-5

0

5

10

15

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(US$ billion)

Capital & fiacial accut balacSource: The Bank of Korea (balance of payments trends)

11. Prices andinternationalcommodity prices

Direct investment Portfolio investment Financial derivatives Capital & financial account

11.1 PricesConsumer prices fell 0.3 percent month-on-month

in October, declining for the second consecutive

month. Compared to the same month of the

previous year, consumer prices rose 1.2 percent,

up from 1.1 percent in September.


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-2

0

1

2

3

4

5

6

7

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(%)

Csum pic iflatiSource: Statistics Korea (consumer price trends)

Consumer price inflation (m-o-m) Consumer price inflation (y-o-y)

Agricultural, livestock & fishery product prices were

down 3.5 percent month-on-month (agricultural

products down 5.3%, livestock products down 2.9%,

fishery products up 1.2%), as demand slowed after

theChuseokholiday while supply remained stable.

Pic icass by itm(m-o-m, %)

tomatoes (12.6), chicken (7.0), pork (-7.9), lettuces (-30.6),

Chinese cabbages (-32.8), spinach (-32.8)

Manufactured product prices fell 0.3 percent from the

previous month. Processed food prices declined 0.1

percent, and petroleum product prices fell 1.7 percent

due to stabilizing international oil prices.

(%)

2013 2014

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Month-on-Month -0.3 0.0 0.1 0.5 0.3 0.2 0.1 0.2 -0.1 0.1 0.2 -0.1 -0.3

Year-on-Year 0.9 1.2 1.1 1.1 1.0 1.3 1.5 1.7 1.7 1.6 1.4 1.1 1.2

Csum pic iflati



body washes (20.2), toothpaste (14.1), gasoline (-1.8),

diesel (-2.0), ham (-9.2), bags (-10.8)

Dining out expenses rose 0.1 percent, while personal

service prices excluding dining out costs remainedunchanged.


domestic group tour expenses (5.9), overseas group tour

expenses (-3.0), high school tutoring fees (0.4), domestic

flight fares (-2.1), home-study materials (-2.5), home gas

installation expenses (-5.3)


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Consumer prices for basic necessities rose 0.7

percent year-on-year but fell 0.5 percent month-on-

month.

Pic icass f basic cssitis(y-o-y, %)

0.6 (Jan 2014) >0.4 (Feb) >0.8 (Mar) >1.0 (Apr) >1.4 (May)

>1.4 (Jun) >1.4 (Jul) >0.8 (Aug) >0.6 (Sep) >0.7 (Oct)

Fresh food prices declined 6.6 percent year-on-year,

led by vegetables (down 10.0%). Compared to the

0

1

2

3

4

5

2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014

(%p)

-5

-2

1

4

7

10

13

16

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(y-o-y, %)

Ctibuti t csum pic iflati

Source: Statistics Korea (consumer price trends)

PicsSource: Statistics Korea (consumer price trends)

Agricultural, livestock & fishery products

Public services

Housing rents

Personal services Public utilities

Manufactured products

Consumer price inflation Producer price inflationCore inflation

previous month, fresh food prices fell 5.6 percent.

Fsh fd pic icass(y-o-y, %)

-12.9 (Jan 2014) >-12.4 (Feb) >-11.3 (Mar) >-12.0 (Apr)

>-9.2 (May) >-7.7 (Jun) >-8.3 (Jul) >-11.8 (Aug) >-8.6

(Sep)>

-6.6 (Oct)

Core consumer prices, which exclude oil and

agricultural products, rose 1.8 percent year-on-year

but remained unchanged from the previous month.


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4

(y-o-y, %)

2013 2014

Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Consumer prices excluding oil and agricultural products 1.8 2.0 1.9 1.7 1.7 2.1 2.3 2.2 2.1 2.2 2.4 1.9 1.8

Consumer prices excluding food and energy 1.6 1.7 1.6 1.5 1.4 1.7 1.9 1.8 1.7 1.9 2.1 1.7 1.6

Consumer prices for basic necessities 0.0 0.5 0.5 0.6 0.4 0.8 1.0 1.4 1.4 1.4 0.8 0.6 0.7

C iflati ad pics f basic cssitis

Source: Korea PDS

(US $/barrel, period average)

2011 2012 2013 2014

Annual Annual Annual Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Dubai crude 105.9 109.0 105.3 105.5 107.5 104.0 105.0 104.4 104.6 105.6 107.9 106.1 101.9 96.6 86.8

Brent crude 111.0 111.7 108.7 108.0 110.7 107.7 108.9 107.7 107.8 109.4 111.8 107.4 102.6 98.0 87.8

WTI crude 95.1 93.8 98.0 94.0 97.9 94.9 100.7 100.5 102.0 101.8 105.2 102.6 96.3 93.2 84.4

International oil prices declined in October due to concerns over a slowdown in major economies

including the EU and Japan, and also due to increasing supplies and the strong dollar.

Dubai crude prices continued to fall due to the strong dollar, increased production in the US, Iraq and

Libya, and concerns that demand will fall as the economy slows.

Dubai cud(US $/barrel)

93.5 (Oct 1) >89.9 (Oct 8) >84.2 (Oct 15) >83.3 (Oct 23) >84.1 (Oct 29)

Dlla idx(Mar 1973=100)

85.3 (Oct 8) >85.2 (Oct 15) >85.7 (Oct 22) >86.0 (Oct 29) >86.9 (Oct 31)

The expected annual inflation declined 0.1 percentage points from the previous month to 2.7 percent, while

import prices fell 8.8 percent year-on-year.

expctd iflati(%, over the next 12 months)

2.9 (Jan 2014) >2.9 (Feb) >2.8 (Mar) >2.9 (Apr) >2.8 (May) >2.8 (Jun) >2.8 (Jul) >2.8 (Aug) >2.8 (Sep) >2.7 (Oct)

Impt pic icass(y-o-y, %, won base)

-3.0 (Jan 2014) >-4.8 (Feb) >-4.5 (Mar) >-7.0 (Apr) >-6.8 (May) >-8.8 (Jun) >-8.6 (Jul) >-9.9 (Aug) >-8.8 (Oct)

11.2 International oil andcommodity prices



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($/B)(thousand won/B)

20

40

60

80

100

120

140

160

20

40

60

80

100

120

140

160

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

Dubai cud pics ad impt picsSource: Korea National Oil Corporation

Dubai crude (import prices, won, left) Dubai international prices (dollar, right)

Source: Korea National Oil Corporation

(Won/liter, period average)2011 2012 2013 2014


Gasoline prices1,929.3 1,985.8 1,924.5 1,880.0 1,881.1 1,886.4 1,880.7 1,880.8 1,875.9 1,869.5 1,861.7 1,856.7 1,842.0 1,817.1 1,781.1

Diesel prices 1,745.7 1,806.3 1,729.6 1,692.9 1,699.1 1,705.1 1,698.5 1,696.0 1,688.9 1,680.9 1,670.8 1,661.8 1,644.5 1,620.9 1,585.0

Domestic gasoline prices fell to about 1,700 won in October, as falling international oil prices were reflected

with a time lag.

Gasli pics(won/liter)

1,800.3 (1stweek Oct) >1,793.8 (2ndweek) >1,787.3 (3rdweek) >1,776.4 (4thweek) >1,760.6 (5thweek)

0

20

40

60

80

100

120

140

160

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

($/B)

Itatial il pics

Source: Korea National Oil Corporation

Dubai crude WTI


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0

1000

2000

3000

4000

150

190

230

270

310

350

390

430

470

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

Itatial cmmdity picsSources: Bloomberg (CRB), The Bank of Korea (Reuters Index)

* CRB demonstrates a futures price index of 21 commodities listed on the US Commodity Transaction Market, including

beans and other crops, crude oil and jewelry.

CRB (left) Reuters index (right)

International grain prices inched up month-on-month in October due to droughts in the US and Brazil and

bargain hunting. However, soybean prices declined as a result of expectations for a strong harvest.

Itatial gai pic icass i octb (m-o-m, %)

soybeans (-0.7), wheat (1.8), corn (3.1)

Nonferrous metal prices fell month-on-month as demand was expected to slow due to poor economic data in

China and the eurozone.

nfus mtal pic icass i octb(m-o-m, %)

nickel (-12.8), tin (-5.8), lead (-4.0), aluminum (-2.7), copper (-1.9), zinc (-1.4)

* A weighted average index of 17 major commodities

Source: KOREA PDS

(Period average)

2011 2012 2013 2014


3,062 3,006 2,774 2,623 2,642 2,574 2,586 2,641 2,650 2,608 2,569 2,548 2,510 2,415 2,395

ruts idx*


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-1.0

0.0

1.0

2.0

3.0

2009.1 7 2010.1 7 2011.1 7 2012.1 7 2013.1 7 2014.1 7

(m-o-m, %)

Apatmt sals pics by giSource: Korea Appraisal Board

1. Upscale area of Southern Seoul 2. Northern Seoul

Source: Korea Appraisal Board


2010 2011 2012 2013 2014

Annual Annual Annual Annual Annual Mar Apr May Jun Jul Aug Sep Oct

Nationwide 1.9 6.9 0.0 0.3 1.4 0.2 0.1 0.0 0.0 0.0 0.1 0.2 0.2

Seoul metropolitan area -1.7 0.5 -3.0 -1.1 1.2 0.3 0.0 -0.1 0.0 0.0 0.1 0.3 0.3

Seoul -1.2 0.3 -2.9 -1.4 1.0 0.2 0.0 -0.1 -0.1 0.0 0.0 0.2 0.2

Gangnam -1.0 0.3 -3.5 -1.1 1.1 0.2 -0.1 -0.1 -0.1 0.0 0.0 0.3 0.3

Gangbuk -1.4 0.3 -2.3 -1.7 0.9 0.2 0.1 0.0 0.0 -0.1 0.1 0.1 0.2Areas excluding the Seoulmetropolitan area

6.4 15.1 3.1 1.7 1.5 0.2 0.1 0.1 0.1 0.1 0.1 0.2 0.2

natiwid apatmt sals pics

Nationwide Seoul metropolitan area Areas excluding Seoul metropolitan area


Nationwide apartment sales prices in October rose

0.2 percent month-on-month.

Apartment sales prices rose in the Seoul

metropolitan area(up 0.3%), which includes Seoul

(up 0.2%), Gyeonggi Province(up 0.3%)and Incheon

12.1 Housing market (up 0.2%). Prices in areas excluding the Seoulmetropolitan area rose 0.2 percent. Apartment prices

in the five metropolitan cities and the eight provinces

were up 0.3 percent and 0.2 percent, respectively.

Apatmt sals pic icas i fiv mtplita citis

(m-o-m, %)

Busan (0.1), Daegu (0.4), Gwangju (0.1), Daejeon (0.2),

Ulsan (0.3)


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1. Upscale area of Southern Seoul 2. Northern SeoulSource: Korea Appraisal Board

(Percentage change from previous period)2010 2011 2012 2013 2014

Annual Annual Annual Annual Annual Mar Apr May Jun Jul Aug Sep Oct

Nationwide 7.1 12.3 3.5 4.7 2.8 0.5 0.1 0.1 0.1 0.1 0.2 0.3 0.3

Seoul metropolitan area 6.3 11.0 2.1 6.2 4.0 0.7 0.1 0.0 0.1 0.2 0.2 0.5 0.4

Seoul 6.4 10.8 2.1 6.6 3.0 0.5 0.1 0.0 0.0 0.1 0.1 0.3 0.4

Gangnam 7.6 11.1 2.4 6.7 2.8 0.4 -0.1 -0.1 0.0 0.1 0.2 0.3 0.4

Gangbuk 5.1 10.6 1.8 6.4 3.2 0.6 0.2 0.1 0.1 0.1 0.1 0.3 0.4

Areas excluding the Seoulmetropolitan area

9.2 14.5 4.6 3.3 1.8 0.2 0.2 0.1 0.1 0.1 0.1 0.2 0.2

natiwid apatmt tal pics

Nationwide apartment rental prices in October rose 0.3 percent month-on-month.

Rental prices rose 0.4 percent in the Seoul metropolitan area, and were up 0.2 percent in regions excluding the

Seoul metropolitan area.

Apatmt tal pic icas i maj disticts i Sul(m-o-m, %)

Gangnam (0.4), Seocho (0.3), Songpa (0.3), Gangdong (0.5), Yangcheon (0.7)

-2.0

-1.0

0.0

1.0

2.0

3.0

2009.1 7 2010.1 7 2001.1 7 2012.1 7 2013.1 7 2014.1 7

(m-o-m, %)

Apatmt tal pics by giSource: Korea Appraisal Board



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20

40

60

80

100

120

140

160

2009.1 7 2010.1 7 2011.1 7 2012.1 7 2013.1 7 2014.1 7

(thousands)

Mthly apatmt tasacti vlumSource: Ministry of Land, Infrastructure and Transport

Source: Ministry of Land, Infrastructure and Transport

(Monthly average, thousands)

2009 2010 2011 2012 2013 2014

Annual Annual Annual Annual Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Nationwide 73 67 82 61 57 90 85 93 59 79 89 93 78 73 77 76 86

Apatmt sals tasactis


12.2 Land market

Nationwide land prices in September rose 0.19 percent month-on-month.

Land price growth accelerated in the Seoul metropolitan area (up 0.19%), which includes Seoul(up 0.29%) andIncheon (up 0.13%).

Lad pic icass i Sul mtplita aa(m-o-m, %)

0.14 (Feb 2014) >0.22 (Mar) >0.18 (Apr) >0.15 (May) >0.13 (Jun) >0.15 (Jul) >0.13 (Aug) >0.19 (Sep)

Land price growth also accelerated in areas excluding the Seoul metropolitan area (up 0.18%), which include

Busan (up 0.19%), Daegu(up 0.27%) and Ulsan (up 0.17%).

Lad pic icass i aas xcludig Sul mtplita aa(m-o-m, %)

0.14 (Feb 2014) >0.17 (Mar) >0.18 (Apr) >0.15 (May) >0.18 (Jun) >0.20 (Jul) >0.15 (Aug) >0.18 (Sep)

Apartment sales transactions in September increased 13.4 percent from 75,973 transactions in the previous

month to 86,186 transactions, and were up 51.9 percent from a year earlier (56,733).


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-15

-18

-12

-9

-6

-3

0

3

6

9

12

15(%)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

(y-o-y, %)

-20

-10

0

10

20

30

40

50

60

1974 1977 1980 1983 1986 1989 1995 2001 2004 2010 2013

1992 1998 2007

Source: Korea Appraisal Board


2008 2009 2010 2011 2012 2013 2014Annual Annual Annual Annual Annual Annual Q1 Q2 Q3 Q4 Annual Q1 Q2 Jul Aug Sep

Nationwide -0.31 0.96 1.05 1.17 0.87 1.14 0.21 0.37 0.10 0.46 1.43 0.45 0.48 0.17 0.14 0.19

Seoul -1.00 1.40 0.53 0.97 0.33 1.21 0.10 0.41 0.08 0.61 1.98 0.69 0.59 0.21 0.19 0.29

Gyeonggi -0.26 1.22 1.49 1.47 0.97 0.91 0.17 0.33 0.07 0.34 0.90 0.26 0.37 0.11 0.08 0.09

Incheon 1.37 1.99 1.43 0.66 0.36 0.87 0.21 0.37 0.07 0.23 0.95 0.37 0.25 0.07 0.12 0.13

Lad pics by giSource: Korea Appraisal Board

Lad ad csum pics sic 1970sSources: Korea Appraisal Board (land prices), Statistics Korea (consumer prices)

Lad pics by gi

City CountyNational average Metropolitan city

Land price inflation Consumer price inflation


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(thousand m)

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

0

100,000

200,000

300,000

400,000

500,000

Areas excluding Seoul metropolitan areaSeoul metropolitan area

Lad tasacti vlumSource: Korea Appraisal Board

1. Monthly average

Source: Korea Land & Housing Corporation

(Land lots, thousands)

2008 2009 2010 2011 2012 2013 2014

Annual Annual Annual Annual Annual Annual Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep

Nationwide 208 203 187 208 170 187 208 201 236 183 205 227 233 207 199 219 204 214

Seoul 26 22 16 18 13 17 20 19 22 17 20 24 22 18 18 21 21 23

Gyeonggi 45 46 41 43 33 37 44 41 50 37 42 47 49 42 39 45 42 46

Incheon 13 10 8 10 8 8 10 9 9 7 10 10 11 9 9 8 9 10

Lad tasactis

There were 214,000 land transactions in September, up 4.5 percent from the previous month and 48.2 percent

from 144,000 a year earlier.

Land transactions rose in Seoul (up 11.4%, m-o-m)and Incheon (up 16.1%, m-o-m), as well as in Ulsan (up

10.9%, m-o-m), Gwangju (up 19.0%, m-o-m)and Sejong(up 19.4%, m-o-m).

Vacant land transactions, which accounted for 34.7 percent of the total land transactions, fell 2.4 percent

month-on-month to 74,000 but were up 30.5 percent from 57,000 a year earlier.


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(%)

-15

-10

-5

0

5

10

15

20

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

Index of all industry production(y-o-y)Index of all industry production (m-o-m)

Idx f all idusty pductiSource: Statistics Korea (industrial activity trends)

13. Composite indices ofbusiness cycle indicators

Industrial output in September fell 0.9 percent month-on-month but rose 1.8 percent year-on-year. Output

rose in mining & manufacturing(up 0.1%, m-o-m)and services(up 0.1%, m-o-m), but fell in construction

(down 5.8%, m-o-m) and public administration (down 8.9%, m-o-m).

1. Preliminary

2014

Feb Mar Apr May Jun Jul Aug SepIndex of all industry production (m-o-m, %) -1.5 0.7 -0.6 -1.0 2.3 0.3 -0.7 -0.9

(y-o-y, %) 1.4 2.7 1.4 -0.6 1.7 2.7 0.4 1.8

Coincident composite index (m-o-m, %) 0.3 0.4 0.1 0.0 0.3 0.4 0.7 0.2

Cyclical indicator of coincident composite index 100.6 100.7 100.5 100.1 100.1 100.2 100.5 100.3

(m-o-m, p) -0.1 0.1 -0.2 -0.4 0.0 0.1 0.3 -0.2

Leading composite index (m-o-m, %) 0.3 0.2 0.5 0.3 0.6 0.4 1.2 1.0

Cyclical indicator of leading composite index 101.5 101.3 101.4 101.3 101.6 101.6 102.4 103.0

(m-o-m, p) -0.1 -0.2 0.1 -0.1 0.3 0.0 0.8 0.6


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43

Th

Gr

B

ook

Cyclical idicat f ladig cmpsit idxSource: Statistics Korea (industrial activity trends)

90

100

110

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

(points)

The cyclical indicator of the leading composite index rose 0.6 points. Among the components of the leading

composite index, the consumer expectations index, domestic shipments of machinery and spreads between

long & short term interest rates declined, while six others, including the ratio of export to import prices and

value of construction orders received, rose.

Cmpts f th ladig cmpsit idx i Sptmb (m-o-m)

indicator of inventory cycle (2.3%p), value of construction orders received (6.8%), ratio of export to import prices (0.9%),

international commodity prices (2.4%), ratio of job openings to job seekers (3.4%p), KOSPI (0.8%), consumer expectations

index (-0.2p), domestic shipments of machinery (-1.2%), spreads between long & short term interest rates (-0.03%p)

The cyclical indicator of the coincident composite index fell 0.2 points month-on-month in September. Among

the components of the coincident composite index, service output, imports and nonfarm payroll employmentrose, while mining & manufacturing production, the value of construction completed, retail sales and domestic

shipments declined.

Cmpts f th cicidt cmpsit idx i Sptmb (m-o-m)

service output (0.1%), imports (2.2%), nonfarm payroll employment (0.4%), mining & manufacturing production (-0.7%),

value of construction completed (-2.3%), retail sales (-0.1%), domestic shipments (-0.9%)

(points)

90

100

110

2004.1 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1

Cyclical idicat f cicidt cmpsit idxSource: Statistics Korea (industrial activity trends)


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PoLICYISSUeS

Korea and China Set to Sign FTA


4


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Policy

Issu

s

45

Korea and China Set to Sign FTA

Korea and China announced progress in their free trade agreement negotiations at the Korea-China

Summit held on November 10, 2014. The two countries have been negotiating the deal for 30 months.

Expected effects

The Korea-China FTA will be a great opportunity for Korean businesses as China is Koreas largest export

destination and its market is huge. When the deal takes effect, US $8.7 billion in tariffs will be lifted

immediately, with an additional US $45.8 billion in tariffs being lifted over 10 years. Trade between Korea and

China is expected to reach US $300 billion in 2015.

Chinese domestic market (KIEP, US $ trillion): 4.7 (2013) >5.7 (2015) >9.9 (2020)

Chinese domestic consumption expenditure (WB, billion yuan): 15,342.2 (2008) >29,216.6 (2013)

Small- and medium-sized exporters will particularly benefit from the trade pact as clothing, leisure goods,healthcare products and high-end electronics will become competitive in the Chinese market, in addition to

major intermediate goods including steel and petrochemical products.

About 71 percent (5,846) of items exported to China, worth US $110.5 billion and accounting for 66 percent of

total export value, will be free of tariffs within 10 years, and 91 percent (7,482) of items, worth US $141.7 billion

and accounting for 85 percent of total export value, will be made tariff-free within 20 years. Meanwhile, 79

percent (9,690) of Chinese items, worth US $62.3 billion which is 77 percent of the total imports from China,

will be free of tariffs within 10 years, and 92 percent (11,272) of items, worth US $73.6 billion which is 91

percent of total imports, will be made tariff-free within 20 years.

President Park Geun-hye (left) isshaking hands with President XiJinping of China in Beijin g onNovember 10 after reaching anagreement to initial the Korea-China FTA by the end of 2014.


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P o l i c y I s s u e s

China agreed to allow Korean businesses to enter construction, distribution, legal services and entertainment

markets, and lower trade barriers in network services. Financial sector negotiations will continue until the end

of the year. Once the FTA takes effect, Korea and China will begin negotiations in order to adopt a negative list

approach in order to allow Korean companies to export more services to China, and these negotiations are

expected to take about two years.

The FTA will also help Korean exporters with nontariff difficulties, such as receiving visas, submitting

certificates of origin, clearing customs in under 48 hours, meeting special shipment reporting duties and

prosecuting intellectual property right infringement. Korean companies will also receive support from Chinese

local government offices designated to help Korean exporters. Korea and China will recognize their trading

partners product tests done by international agencies, support the establishment of product test centers in

their partner countries, and improve the customs clearance process for product samples.

The Korea-China FTA will attract Chinese investment as Chinese corporations will be able to utilize Koreas

other FTAs, including the Korea-US and Korea-EU FTAs. Likewise, US, EU and Japanese investment is also

expected to increase, which wants to use Korea as a springboard for entering China. This will also contribute

to creating quality jobs in Korea.

The Korea-China FTA will further improve Korea-China relations, as China is not only the biggest trade partner

and most important corporate investment destination, but also boasts the highest level of private-sector

exchange between Korea and another country. The Korea-China FTA will encourage joint production of cultural

content, closer cooperation in broadcasting services and tourism, and the joint establishment of entertainment

companies.

Chinese tourists are shopping at a duty free shop in Seoul on September 29. Tourism is one of the sectors that are expected tobenefit from the free trade pact between Korea and China.


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Policy

Issu

s

47

Measures to StimulateDirect Won-Yuan Transactions

As a follow up to agreements made at the Korea-China Leaders Summit held on July 3, the government will

stimulate direct won-yuan transactions by increasing yuan-based transactions for trade settlement and

setting up infrastructure to support yuan-denominated financial services.

The agreements made at the Korea-China Leaders Summit are: opening a direct won-yuan currency market, allowing for

yuan clearing houses to operate in Korea, obtaining an 80 billion yuan quota for Korea investors through the Renminbi Qualified

Foreign Institutional Investor (RQFII) program, allowing Korean investors to participate in the Qualified Foreign Institutional

Investor (QFII) program, and issuing yuan-denominated bonds in Korea.

A cargo ship is entering Gamman Port in Busan on April 1. When the Korea-China FTA takes effect, trade between Korea andChina is expected to reach US $300 billion in 2015.

The Korea-China FTA has less complicated country-of-origin regulations than other FTAs Korea has signed,

and products manufactured in the Gyeseong industrial complex will be treated as Korean products.

Future plans

Korea and China will initial their bilateral trade pact by the end of the year after further discussing details and

reviewing legal matters. The official agreement will be made public after the pact is initialed.


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P o l i c y I s s u e s

Increase the use of yuan for trade settlement

In order to encourage corporations to complete transactions using yuan, the government will:

-increase short-term export insurance coverage by 5-20 percent for exports paid in yuan

-promote yuan financial services

-distribute yuan transaction guide that provides information on yuan performance in the international market

and the benefits

Set up infrastructure to support yuan-denominated financial services

In order to develop a won-yuan direct exchange market and establish a yuan-clearing system, the

government will:

-build an electronic brokerage system and designate dealers in December before the won-yuan direct exchange

market opens

-develop support measures for the yuan clearing house that opened in Seoul on October 30. One example of

the measures can be reforming regulations, such as exempting yuan clearing banks from the Foreign

Exchange Stability Levy on yuan-denominated debt

-increase participation in Chinese asset markets through the RQFII, China Interbank Bond Market (CIMB) and

QFII by easing regulations related to foreign debt investment and foreign exchange transactions

-increase opportunities for private equity funds to invest in yuan-denominated bonds which will be issued in

Korea by Chinese enterprises and other foreign financial institutions

-promote a stable and healthy yuan-denominated financial market by ensuring that large quantities of yuan

flows through the market. This will be done in three ways: promoting yuan-denominated transactions,

encouraging the yuan clearing bank to provide yuan-based loans, and utilizing funds provided by the Peoples

Bank of China and Korea-China Currency Swap Arrangement

Future plans

The government will increase the ratio of yuan trade

settlement from 1.2 percent (as of 2013) to 20 percent in

the mid- to long-term, while encouraging yuan-

denominated financial asset growth in bonds, derivativesand deposits in order to become the third largest investor

in yuan among foreign countries. The government will also

consider issuing yuan-denominated Foreign Exchange

Equalization Bonds in order to prepare for the day the yuan

becomes a reserve currency. A mid- to long-term plan for

the yuan financial market will be developed in 2015.

A bank official is examining yuan notes at the Korea Exchange Bank

headquarters on November 7.


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ITU Plenipotentiary Conference held in Busan

Three-year Plan for Economic Innovation praised at G20 meeting

Korea r

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Economic Bulletin (Vol. 36 No. 11)

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