South Korea

South Korea's economy expanded at the slowest pace in more than three years in the first quarter as consumers and companies curtailed spending.

The economy grew 0.7 percent from the previous quarter, when it advanced 1.6 percent, the central bank said in Seoul recently. That compares with the 0.9 percent median estimate of 13 economists surveyed by Bloomberg News.

Rising fuel costs combined with a gloomy outlook for exports prompted companies to reduce investment, while record household debt is sapping consumer buying power. The government is considering adding 4.9 trillion won ($4.9 billion) to its budget for the year in an effort to sustain the country's nine-year expansion, the Finance Minister Kang Man Soo said recently.

From a year earlier, Asia's fourth-largest economy expanded 5.7 percent in the first quarter, matching the previous period's pace.

Economy to Slow

Real gross domestic income, a measure of purchasing power, fell 2.2 percent from the previous quarter, when it rose 0.3 percent. That's the biggest drop since the fourth quarter of 2000.

Domestic demand, which includes private and corporate spending, grew 0.1 percent, the slowest pace since the third quarter of 2004, the central bank said.

Signs of a slowdown have been emerging as the pace of inflation accelerated to the fastest in more three years and the U.S. housing recession damps global growth.

Factory Output

In March, the leading economic index fell for a third month and the number of new hires declined to a three-year low. Retail sales slowed in February and factory output fell for a second month.

In the meantime, the cost of servicing debt is rising. Lending by South Korean banks to households last month took the level to a record 367 trillion won, and the average lending rate stood at 6.95 percent in February, up from 6.28 percent a year earlier, according to the central bank.

Consumers turned pessimistic for the first time in a year last month and manufacturers' confidence declined from a three- month high. Private consumption growth slowed to 0.6 percent from the previous quarter when it increased 0.8 percent, the bank said recently.

Companies are beginning to scale back spending. Investment in new facilities fell 0.1 percent, after a 2.1 percent gain in the fourth quarter. Construction investment dropped 1 percent after a 1.2 percent increase.