South Korean economy slows to 0.8% growth

SEOUL, South Korea (AP) - South Korea's economic growth slowed in the second quarter as weaker exports, manufacturing and services offset stronger consumer spending and rebounds in construction and capital outlays, the central bank said Wednesday.

Gross domestic product expanded 0.8 percent in the three months ended June 30, the Bank of Korea announced. The economy had grown 1.3 percent in the first quarter.

The latest figure comes after the central bank earlier this month cut its outlook for economic growth this year to 4.3 percent from 4.5 percent amid global uncertainties including debt problems in Europe and the likelihood of a slower recovery in the United States - both major South Korean trade partners.

Despite the weakness, South Korea, Asia's fourth largest economy, still kept up its steady recovery from the global financial crisis and has now grown for 10 straight quarters after contracting in late 2008.

Growth rates for exports, manufacturing and services all slowed in the second quarter. Bright spots included private spending, which more than doubled, while construction and capital spending both grew after contracting during the first three months of the year.

The slowdown in growth comes as the Bank of Korea has been raising interest rates in a bid to snuff our rising inflation. South Korea's consumer price index has been above 4 percent for six straight months through June, when it accelerated to 4.4 percent from the year before amid more expensive food and transportation costs. July inflation figures have yet to be announced.

The BOK earlier this month raised its inflation forecast to 4 percent from its previous expectation of 3.9 percent.

The central bank also said Tuesday that GDP grew 3.4 percent in the second quarter from the same period last year. It had expanded 4.2 percent in the first quarter.

The second-quarter figures are preliminary and may be revised.