GDP rebounds in the third quarter

GDP reading: Economic activity grew 0.1% on a seasonally adjusted quarter on quarter basis in the third quarter, contrasting the 0.2% contraction recorded in the second quarter but undershooting market expectations. While domestic demand improved, this was partly offset by a contraction in exports. On an annual basis, economic growth waned notably to 1.5% in Q3, following the previous quarter's 2.3% growth and marking the worst reading since Q3 2023.

Drivers: Private consumption grew 0.5% seasonally-adjusted quarter-on-quarter in Q3, compared to a 0.2% expansion in Q2. Public consumption recorded a 0.6% expansion in Q3 (Q2: +0.6% s.a. qoq). Fixed investment bounced back, growing 0.7% in Q3, contrasting the 1.4% contraction recorded in the prior quarter; this was driven by facilities investment among semiconductor firms. Exports of goods and services fell 0.4% on a seasonally adjusted quarterly basis in the third quarter, which was below the second quarter's 1.2% expansion. This was partly because of labor strikes hitting automobile exports. In addition, imports of goods and services growth waned to 1.5% in Q3 (Q2: +1.6% s.a. qoq).

GDP outlook: Our Consensus is for the economy to gain speed in Q4, as exports should benefit from a normalization of automobile output. Moreover, mild price pressures should aid private consumption.

Panelist insight: On the outlook, United Overseas Bank’s Ho Woei Chen said: “The outlook for private consumption is positive against the improvements in the labour market and consumer sentiment but the pace of recovery has remained slow. Further monetary policy easing in 2025 may bolster domestic demand along with the recovery in tourism above prepandemic levels by next year. Meanwhile, investments in chips manufacturing equipment are expected to stay positive, bolstered by the government’s incentives to support the industry.” ING’s Min Joo Kang said: “Car exports were down in the previous quarter mainly due to production line maintenance and longer-than-expected labour strikes, thus are likely to rebound while solid IT exports are likely to continue. Imports have grown for the past two quarters, and import growth in the previous quarter tends to boost investment for the next quarter, so facility investment is likely to remain positive.”

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