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South Korean economy grew at the fastest pace in more than two years in the second quarter of this year as a turnaround in private consumption relieved the weak facility investment, central bank data showed Thursday.
Real gross domestic product (GDP), the broadest measure of economic performance, expanded 1.1 percent in the second quarter from three months earlier after gaining 0.8 percent in the previous quarter, according to the Bank of Korea (BOK).
The reading was the highest since 1.3 percent tallied in the first quarter of 2011, beating market consensus of 0.8 percent. The economy eventually escaped from the eighth straight quarter of zero-percent growth.
From a year earlier, the real GDP increased 2.3 percent in the second quarter, up from a 1.5 percent expansion in the prior quarter.
Private consumption, a major growth engine of the economy, rose 0.6 percent in the second quarter from three months earlier, turning around from a 0.4 percent fall in the previous quarter. That led the economy to grow at a rate of more than 1 percent during the quarter.
Government expenditure advanced 2.4 percent over the cited period, and construction investment gained 3.3 percent, helping the economy grow at a faster pace.
Fiscal and monetary stimulus measures enhanced consumption and the construction industry. The South Korean government unveiled 17. 3 trillion won (15 billion U.S. dollars) worth of supplementary budget in mid-April, while taking measures to support the housing market such as tax breaks and fewer borrowing restrictions.
The BOK cut its policy rate by 25 basis points to 2.5 percent in May as part of its efforts to stimulate the sluggish economy. The central bank revised up its 2013 growth outlook earlier this month to 2.8 percent from a previous forecast of 2.6 percent.
Exports of goods and services, which account for around half of the economy, gained 1.5 percent in the second quarter from three months earlier, but the figure was lower than a 3 percent increase in the prior quarter.
"Exports struggled in the face of stiff Japanese competition as the weaker yen took a heavy toll," said Matthew Circosta, an economist at Moody's Analytics in Sydney. "Foreign sales of Korean- made autos have been sliding since mid-2012, and the trend has worsened since Japan started aggressively easing policies in September."
Facility investment declined 0.7 percent during the April-June period after rising 2.6 percent in the previous three-month period. The decline indicated corporate reluctance to spend capital in facilities amid lingering uncertainties at home and abroad.
On the production front, output in the manufacturing sector expanded 0.8 percent in the second quarter from three months earlier due to robust demand for smartphones, semiconductors and petrochemical products.
Production among service firms increased 0.9 percent over the same period, while production growth in the construction sector slowed to 1.5 percent in the second quarter from 4 percent in the previous quarter.
