Consumers revive South Korea's economy.

Key observers are looking to consumer spending to accelerate South Korea's economic rebound. Moreover, notwithstanding that households will spend more during the second half of 2007, there are no concerns about inflationary pressures.

A May 11, 2007 update of the highly regarded Korean Development Institute's (KDI) review of the economy, was optimistic about the country's prospects. The KDI is a government owned think tank and is based in Seoul.

One of the key reasons for the optimism expressed by the KDI was the fact that the slowdown in the economy of the United States (US) did not appear to be spreading to other countries.

A May 10, 2007 report by KBS World Radio (Korean Broadcasting System, Seoul) said, "Consumer spending will grow at a low 4 percent rate this year, a more positive outlook than [KDI's] previous three-point-nine percent growth forecast."

Additionally, KBS said that the South Korean economy was likely to expand 4.6 percent during the second half 2007. Both KBS references were to the KDI report cited above.

The International Monetary fund (IMF) estimates that South Korea will expand 4.4 percent during 2007, and another 4.4 percent in 2008.

For such a dynamic, large economy, South Korea's unemployment is very low.The IMF says that the rate of unemployment was 3.7 percent in 2005. It's estimate of 2006 unemployment is 3.6 percent. And for 2007, the IMF is forecasting unemployment at 3.3 percent declining to 3.1 percent in 2008.

This tight labor market is likely to drive up wages, and will certainly impact positively on consumer spending.

An April 25, 2007 story with combined reporting from Bloomberg News and the Associated Press (AP) appearing in the International Herald Tribune (Neuilly) confirmed that South Korea's economy grew 4.0 percent during the first quarter 2007.

The Tribune story also said that private consumption-mostly made up of consumer spending-grew 4.0 percent in the first quarter 2007. The Tribune quoted an analyst at the private Samsung Economic Research Institute to the effect that the consumer spending number was disappointing.

The analyst said, "South Koreans remain prone to saving as the society ages and as high levels of spending on education leave little left over for other things."

Consumer spending accounts for approximately half of South Korea's GDP.

Reduced tensions with North Korea, and the recent free trade agreement with the US will make a positive impact on consumer spending as 2007 goes on, said the Samsung analyst.

The first quarter 2007 marked 16 continuous quarters of expansion for South Korea.

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