South Korea economy returns to growth in Q3 as stimulus kicks in

South Korea's construction sector has not rebounded as quickly as exports, though there are some signs that factory production is improving with manufacturing sector output up 7.6% from the second quarter.

South Korea's economy returned to growth in the third quarter, recovering from its sharpest contraction in more than a decade, as the government pushed through stimulus measures and major trading partners eased coronavirus pandemic restrictions. Asia's fourth-largest economy grew a seasonally adjusted 1.9% in the September quarter from the June quarter, the Bank of Korea said on Tuesday, logging its fastest expansion since the first quarter of 2010.

That reverses a 3.2% decline in the second quarter, which was the sharpest since 2008, and beats the 1.7% expansion seen in a Reuters poll. The government has been rolling out a planned 310 trillion won ($274.83 billion) of fiscal stimulus scheduled for this year to boost economic activity.

Exports soared 15.6% in the third quarter in sequential terms, rebounding at a pace not seen since 1986 and reversing a 16.1% contraction in the second quarter. South Korea's construction sector has not rebounded as quickly as exports, though there are some signs that factory production is improving with manufacturing sector output up 7.6% from the second quarter. Construction investment was a drag, declining 7.8% on-quarter, while private consumption fell 0.1%.

On a year-on-year basis, the economy shrank 1.3% in the third quarter, after declining a revised 2.7% in the second quarter.