US economy GDP declines, Korean industry recession ‘consumption stimulus’ department store rises highest
As the US economy cools down due to the first quarter recession, Korean industry has been decreasing in April and May, and only finance has increased, and department stores show the abnormal pattern of the highest increase in sales of 3.1% due to government consumer stimulus from decreased consumption.
In Korea, May retail sales were ‘led by department store increase’ in specialty retail stores (+1.3%), department stores (+3.1%), supermarkets and general stores (+1.1%), and convenience stores (+0.3%), while sales decreased in duty-free shops (-11.6%), non-store retail stores (-0.6%), and passenger car and fuel retail stores (-0.3%), and large marts were flat, so the government’s consumer stimulus economic stimulus policy for the people’s economy shows ‘high price system with luxurious consumption stimulation.’ The decline in the US gross domestic product (GDP) (national goods and services production) in January-March reversed from a 2.4% increase in the last three months of 2024 to a 0.5% annual decline, revealing the first economic contraction in three years.
The US saw its imports increase 37.9% faster than the previous year due to the Trump administration's tariff attack, and its GDP fell by nearly 4.7 percentage points.
The US Department of Commerce announced on the 25th that consumer spending in the first quarter was initially estimated to have declined 0.2% from the 4% growth in the fourth quarter of last year, but the final figure was a 0.5% decline, AP reported on the 27th, indicating a smaller contraction than expected.
Korea's industrial production fell 1.1% in May, becoming a negative for the second consecutive month.
The domestic demand slump due to the combined recession became visible as manufacturing production and shipments, facilities, and construction investment in Korea all fell simultaneously.
The ‘May All-Industry Production Index’ (seasonally adjusted, excluding agriculture, forestry, and fisheries) announced by Statistics Korea on the 30th was 112.5 (2020 = 100), down 1.1% from the previous month.
The All-Industry Production Index decreased by the largest amount in four months since January of this year (-1.6%), and is the second consecutive month of negative figures following April’s negative figure of -0.8%.
The structure of Korea’s industry worsening into a negative figure is the result of decreased production in all sectors of the mining, manufacturing, construction, and service industries. While only finance and insurance (+2.8%), which the government is maximizing economic stimulus for, increased, service industry production decreased by 0.1% compared to the previous month due to a sharp decline in information and communication (-3.6%) and transportation and warehouse (-2.4%). Manufacturing production decreased by 3.0% compared to the previous month, and increased in primary metals (+1.5%) and petroleum refining (+3.0%), but decreased significantly in pharmaceuticals (-10.4%) and metal processing (-6.9%).
Manufacturing shipments increased in semiconductors (+14.9%) and computers (+42.9%), but decreased in automobiles (-2.1%) and metal processing (-7.2%), decreasing by 1.6% compared to the previous month.
Statistics Korea's indicators showed that the coincident composite index cyclical change, which shows the current economic situation, fell by 0.4p compared to the previous month, and the leading composite index cyclical change, which predicts the future economic situation, fell by 0.1p compared to the previous month, foreshadowing a continued recession in the future. The AP reported that “Americans’ views on the U.S. economy worsened in June, resuming the downward trend that had driven their April consumer confidence index to its lowest level since the COVID-19 pandemic began five years ago,” the conference board said on the 24th.
“The conference board said its consumer confidence index fell to 93 in June, down 5.4 points from 98.4 last month.” The AP continued, “A measure of Americans’ near-term expectations about income, business conditions and the job market fell 4.6 points to 69, well below 80, which is a sign that a recession is coming.”
“Today’s downward revision to consumer spending is a potential red flag,” former Federal Reserve economist Claudia Sahm told the AP. Sahm, chief economist at New Century Advisors, told the AP that the Commerce Department revised down spending on recreation services and international travel, reflecting “great consumer pessimism and uncertainty.”
The GDP data category, which measures the underlying strength of the U.S. economy, rose at an annualized rate of 1.9% in the first quarter, from January to March, but that was down from a 2.9% increase in the previous quarter, in 2024.
The Commerce Department’s previous estimate for the first quarter was 2.5% growth, and the 1.9% figure is a sharp drop.
“This category includes consumer spending and private investment, but excludes volatile items like exports, inventories and government spending,” the AP said. “Federal spending fell at an annualized rate of 4.6%, the largest decline since 2022.”
In May, Korea's wholesale and retail trade decreased by 0.8% compared to the previous month, while retail trade (+0.6%) increased, but wholesale trade (-0.8%) and automobile and parts sales (-6.1%) decreased.
Accommodation and restaurants decreased by 0.1% compared to the previous month, with an increase in accommodation (+2.0%) but a decrease in restaurants and bars (-0.5%).
Finance and insurance increased by 2.8% compared to the previous month, with increases in finance (+3.1%), financial and insurance-related services (+2.6%), and insurance (+0.5%).
The retail sales index showed a flat trend compared to the previous month, with sales increasing in durable goods such as communication devices and computers (1.2%) and semi-durable goods such as clothing (0.7%), but decreasing in non-durable goods such as cosmetics (-0.7%).
South Korea’s exports in May fell 1.3%, with exports to the US and China each down more than 8%.
Shipments to the US fell 0.5% last month, continuing a three-month decline, while shipments to China also fell for the second month, dropping 2.7%.
In contrast, exports to the European Union (EU) rose 14.7%, while exports to Southeast Asian countries rose 2.1%.
According to a survey conducted by the Bank of Korea, South Korea’s consumer sentiment hit a six-month high, boosted by political stability following the surprise presidential election on June 3, ending six months of uncertainty, while business sentiment on future production prospects rebounded from the previous month as companies’ concerns about global economic risks eased, the strongest reversal since May 2024 due to political stimuli.
In contrast, the Bank of Korea's survey results showed that actual production and new orders decreased at a moderate pace, and new export orders decreased more rapidly due to weakening sales in major markets such as Japan, China, and the United States.
On the 8th, Lee Han-joo, the chairman of the National Policy Planning Committee, stated that the most important tasks were people's livelihood and economic recovery, and that "the fastest prescription is consumption," and revealed economic recovery through consumption stimulation as a key policy.
Chairman Lee, a former head of the Democratic Research Institute and a close associate of President Lee Jae-myung, said that "the most effective part of the people's economy is consumption," and that "it takes a long time for people's capacity enhancement or education and training to be reflected in the economy, but if money is procured and spent to generate consumption, it doesn't take long for the economy to revive," and announced a "consumption stimulation economic recovery policy."
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