South Korea’s state-run economic think tank on Thursday flagged persistent weakness in construction investment and a potential slowdown in exports, even as consumption indicators showed modest improvement. In its August economic trends report, the Korea Development Institute (KDI) noted that production growth remains sluggish, largely due to a sustained slump in the construction sector, but falling market interest rates and government-issued cash vouchers are helping stabilize consumer sentiment.

Retail sales remained flat in June, while service consumption contracted in categories including education, food and accommodation. However, the consumer sentiment index rose for a second straight month in July, reaching