Oil surge offsets Korea’s chip-driven consumption gains: KDI

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In a report released Thursday on the effects of the semiconductor boom and rising oil prices on private consumption, the KDI estimated that higher semiconductor prices added just…

South Korea’s consumer spending has been slow to recover this year despite a semiconductor boom, as higher oil prices have weighed on household spending, the Korea Development Institute (KDI) said.

In a report released Thursday on the effects of the semiconductor boom and rising oil prices on private consumption, the KDI estimated that higher semiconductor prices added just 0.003 percentage point to consumption growth this year, while rising oil prices shaved 0.36 percentage point off the rate.

The boost from the semiconductor boom is expected to take time to reach households. Performance bonuses and dividend payments by semiconductor exporters may lag improvements in operating profit, while further delays are possible before higher household income translates into broader consumption growth, the KDI said.

Consumption is expected to begin rising four quarters after semiconductor prices increase and reach its peak impact seven to eight quarters later, the institute said.

Higher oil prices stemming from the Middle East conflict, by contrast, have had a more immediate impact on household spending. A domestic price cap has limited increases in petroleum product prices, but higher global oil prices have pushed up prices for travel, air transportation and other related services, contributing to inflation, the KDI said.

The KDI expects the semiconductor boom to add about 0.6 percentage point to private consumption growth in 2027, while the drag from higher oil prices is projected to ease to about 0.2 percentage point. It expects consumption to recover more noticeably in the second half of next year.

“Consumption would rise gradually in the first half of 2027 before picking up more noticeably in the second half,” said Kim Ji-yeon, head of the KDI’s economic outlook division.

Higher performance bonuses and dividend payments by major semiconductor companies could provide an additional boost to consumption.

However, uncertainty in the Middle East, weak domestic demand, high interest…

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