South Korea's economy is continuing to grow at a solid pace on the back of global investment in artificial intelligence infrastructure, the state-run Korea Development Institute said on Monday, but the boom is barely reaching ordinary households. In its November report, the think tank said semiconductor production and investment kept growing strongly on robust external demand, while consumption improved only modestly.

In October, South Korea's outbound shipments surged 93.7 per cent from a year earlier to a record $115.3 billion, driven by strong global demand for semiconductors and continued spending by major technology companies on AI infrastructure. On a daily average basis, semiconductor exports jumped 226.8 per cent and computer exports climbed 442.3 per cent. Real gross domestic product expanded 3.4 per cent from a year earlier in the third quarter.

But the KDI said the effects of the improvement were spreading only gradually across households. Private consumption growth slowed to 1.1 per cent in the third quarter, down from 2.4 per cent in the previous quarter, and retail sales fell 0.4 per cent in September from a year earlier.

Oil prices and rates squeeze spending

The institute pointed to two forces holding households back. Income gains from the semiconductor boom had shown no clear signs of spreading broadly across households, it said, while high oil prices continued to weigh on household finances and higher market interest rates constrained spending capacity. Consumer prices rose 2.8 per cent on-year in October, easing from 2.9 per cent in September, but inflation remained elevated.

Manufacturing output grew 1.2 per cent, driven by semiconductors, up 10.3 per cent, and machinery, up 17.9 per cent. The KDI's message is that South Korea's export engine is running at full speed on AI demand, while the domestic economy waits for the benefits to arrive.