Seoul: The South Korean economy is demonstrating a gradual recovery in industrial production, driven by stronger consumption, even as the construction sector continues to struggle, a state-run think tank reported.

According to Yonhap News Agency, the Korea Development Institute (KDI) highlighted in its monthly economic assessment that although the construction sector remains sluggish and manufacturing has undergone some adjustments, improvements in consumption are supporting a moderate increase in production.

In November, industrial output increased by 0.9 percent from the previous month, primarily due to robust semiconductor production. Exports grew 13.4 percent compared to a year earlier in December, reaching US$69.6 billion, marking the 11th consecutive month of growth.

The KDI pointed out that while semiconductor-related exports remain high amid favorable market conditions, the increase largely reflects price surges, while the previous strong growth in the broader production sector has moderated. "Production outside the semiconductor sector continued to rise modestly, keeping the business sentiment index for manufacturing firms at a low level," the KDI added.

Retail sales, a key measure of private consumption, have shown fluctuations recently due to temporary factors such as government policies but have demonstrated a gradual improvement overall. Retail sales fell 3.3 percent on-year in November, following a brief rebound the previous month, marking the steepest monthly decline since February 2024, when they dropped 3.1 percent.

The KDI acknowledged that construction investment continued to weaken, with the sector's output falling sharply in November by 17 percent from a year earlier, following a 24.8 percent drop in the previous month.

In the labor market, despite the weak performance in the construction and manufacturing sectors, employment growth has widened slightly, driven mainly by the service sector, as noted in the report.