South Korea’s economy is showing a broader recovery centered on semiconductors, the Korea Development Institute said in its August Economic Trends report, upgrading its view from last month’s assessment of a "moderate recovery trend." KDI said stronger semiconductor exports are being joined by improving durable goods consumption and facility investment, raising expectations for a wider rebound. June all-industry production rose 4.2% year on year, with services output up 5.3% and manufacturing rebounding across sectors including automobiles, up 12.6%, and machinery equipment, up 14.4%. Consumption also improved, with the June retail sales index rising 4.2% and durable goods sales jumping 10.9%, a sharp acceleration from 1.5% growth the previous month, while July consumer sentiment reached 106.8, above the long-term average. External demand and investment remained strong as July exports increased 69.6% on a daily average basis and 62.8% in total, while ICT exports surged 178.2%, led by semiconductors. June facility investment climbed 21.7%, supported by a 58.5% rise in semiconductor manufacturing equipment investment. KDI said AI-related demand is sustaining export growth but warned that uncertainty is rising because of U.S. tariff measures on South Korean goods and renewed tensions in the Middle East. It also flagged slower employment growth, still-elevated inflation and a prolonged slump in construction investment as constraints on the outlook. June employment rose by 63,000 jobs from a year earlier, improving from the prior month’s 40,000 decline but remaining well below the first-quarter monthly average increase of 183,000. July consumer inflation eased to 2.8% from 3.2%, though core inflation edged up to 2.6%, and June construction completions fell 4.0% as weakness in residential building activity persisted.