In its February economic trends report, released Monday, the KDI noted that while industrial production showed some growth, broader economic challenges persisted.
"Domestic demand remains weak due to sluggish consumption and a downturn in construction investment," the KDI said. "At the same time, export growth is slowing, particularly in non-semiconductor sectors."
Consumer spending has been hit hard, with retail sales declining across key categories, including automobiles, home appliances, and clothing. The consumer sentiment index stood at 91.2 in January, well below the neutral threshold of 100, signaling widespread caution among households.
Although facility investment has maintained its recovery, driven by increased spending in the semiconductor sector, construction activity remains depressed.
Labor market conditions have also softened. The number of employed individuals dropped by 52,000 in December compared to the previous year, a decline attributed to job losses in construction and manufacturing, as well as the expiration of government-backed employment programs.
Inflation edged higher in January, with consumer prices rising 2.2 percent year-on-year, driven primarily by a 7.3 percent surge in petroleum product prices. Core inflation, however, remained subdued at 1.9 percent, reflecting tepid domestic demand.
Industrial production grew 1.4 percent in December, buoyed by an increase in working days and improved manufacturing output. However, the ongoing struggles in the construction sector continued to weigh on overall economic performance.
The report also highlighted ongoing geopolitical uncertainties, which, along with domestic economic concerns, have dampened both household and business confidence.
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