South Korea's financial conditions continue to ease, with tech stocks leading the rally and driving FCI improvement

Overview

This is a Goldman Sachs global economic indicators update, with the title highlighting the continued easing in South Korea's financial conditions. The report tracks financial conditions, current activity, inflation, wages, fiscal policy shocks, short-run resource utilization, and the gap between Goldman Sachs forecasts and market consensus across major economies through a series of proprietary Goldman Sachs indicators. The key takeaway is that South Korea's FCI eased by 29bp last week, tech stocks continued to drive improvement in the equity market, and Goldman Sachs raised its 2026 growth forecast for South Korea.

Core views

The core views are: first, South Korea's financial conditions eased modestly, which is the most prominent market and macro signal in this issue; second, global ex-Russia FCI also eased slightly, with equities as the main contributor; third, global CAI remains above potential, but monthly momentum in China and Japan has diverged; fourth, inflation, wages, and labor market slack remain key variables for judging the policy path and growth resilience; fifth, FCI impulses and fiscal impulses over the next four quarters will continue to affect real GDP growth.

Analysis framework

The report uses an indicator-dashboard style analysis, integrating financial market prices, high-frequency macro activity, wages and inflation, fiscal policy, output gaps, and forecast revisions into a cross-country comparison framework. Its focus is not to provide a single asset trading recommendation, but to use Goldman Sachs proprietary indicators to observe marginal changes in growth, inflation, and policy environments across major economies.

Methodology notes

• Financial conditionsGS Financial Conditions Index

  FCI measures whether financial conditions in major economies are easing or tightening.

  This indicator is used to assess the impact of financial conditions on the GDP growth outlook, the transmission of monetary policy to the real economy, and the importance of financial shocks.

• Growth shockFCI Impulses

  FCI impulses measure the effect of changes in financial conditions on real GDP growth.

  The report shows the FCI impulse path over the next 4 quarters for the United States, the euro area, Japan, the United Kingdom, and other economies.

• Current activityCurrent Activity Indicator

  CAI is the first principal component of multiple real activity indicators and is expressed in GDP-equivalent units.

  CAI can be interpreted as the growth signal embedded in each economy's main high-frequency indicators; missing data are first filled with forecasts and then replaced once actual releases arrive.

• Economic surpriseMAP Surprise Index

  The MAP surprise index summarizes the importance and magnitude of economic indicators relative to consensus expectations.

  The report uses a 21-day moving average of daily MAP scores and standardizes the methodology for indicator selection, importance, surprise thresholds, and aggregation.

• InflationGS Trimmed Core Inflation

  Trimmed core inflation removes the most extreme one-third of price changes within the core inflation basket.

  This method is designed to provide a more stable view of the underlying core inflation trend.

• Labor marketGS Wage Trackers

  Wage trackers measure the pace of potential wage growth across G10 economies.

  The report also looks at wage trackers, sequential wage trackers, wage survey leading indicators, and job-labor gaps.

• Fiscal policyFiscal Impulses

  Fiscal impulses measure the effect of fiscal policy on real GDP growth.

  The report uses the average fiscal growth impulse from 2026Q1 to 2026Q4 to calculate the next-4-quarters indicator; the U.S. fiscal impulse also includes expansionary fiscal policy and tariff-like tax effects.

• Capacity utilizationShort-Run Utilization Scores

  Short-run utilization scores are based on labor market and industrial sector indicators and converted into GDP-equivalent units.

  This indicator was previously called the short-term output gap and is used to gauge the degree of near-term economic resource utilization.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• South Korea macro assets

  linked to easier financial conditions and a higher growth forecast

  Strengths

  FCI eased by 29bp last week, and rising tech stocks improved financial conditions.

  Weaknesses

  The report does not provide specific price targets or trading recommendations for South Korean assets.

  Comparison

  Compared with broader global indicators, South Korea is the headline and chart focus of this issue.

  Risks

  If equities pull back or external financial conditions tighten, the easing signal could reverse.

• Global equity markets

  stock market gains are an important contributor to the easing in global ex-Russia FCI

  Strengths

  Improving equities help reduce pressure from financial conditions.

  Weaknesses

  Equity-driven easing may be sensitive to changes in risk appetite.

  Comparison

  The report says the easing in global ex-Russia FCI mainly came from equities rather than from a single macro policy change.

  Risks

  Valuation corrections, higher rates, or downward revisions to growth expectations could weaken the easing effect.

• Global macro growth

  CAI and fiscal/financial condition shocks together influence the assessment of real GDP growth

  Strengths

  Global CAI remains above potential, and emerging markets such as India show strong momentum.

  Weaknesses

  China's CAI fell week over week, while Japan improved, indicating clear divergence across economies.

  Comparison

  Developed-market CAI is lower than emerging-market CAI.

  Risks

  Inflation, wage pressure, fiscal policy changes, and a reversal in financial conditions could affect the growth path.

Key data

• Weekly change in South Korea FCIeased 29bpThe report says tech stocks continuing to lead the equity market rally was an important backdrop for the easing in South Korea's FCI.
• Weekly change in global ex-Russia FCIeased 0.8bpMainly driven by the stock market.
• Global May spot CAI+2.9% mom annualizedWeekly change was -0.1 percentage points, and the 3-month average was +3.0%.
• Developed markets May spot CAI+2.2% mom annualizedWeekly change was +0.1 percentage points, and the 3-month average was +2.3%.
• Emerging markets May spot CAI+4.0% mom annualizedWeekly change was -0.4 percentage points, and the 3-month average was +4.2%.
• China May spot CAI+4.6% mom annualizedWeekly change was -0.8 percentage points, and the 3-month average was +4.4%.
• Japan May spot CAI+1.3% mom annualizedWeekly change was +0.7 percentage points, and the 3-month average was +1.3%.
• India May spot CAI+7.5% mom annualizedThe 3-month average was +7.3%, placing it at a relatively high level among the economies listed in the table.
• U.S. June short-run utilization score-1.8% of potentialWeekly change was +0.1 percentage points, and the 3-month average was -1.9%.
• Italy June short-run utilization score+6.5% of potentialThe 3-month average was +6.5%, indicating a relatively high level of short-run utilization.

Impact & implications

The easing in South Korea's financial conditions and the upward revision to the 2026 growth forecast provide a marginally positive signal for South Korean growth assets and risk appetite. The slight easing in global ex-Russia FCI also suggests that the financial market environment is placing somewhat less pressure on growth. However, the CAI, inflation, wage, and fiscal shock indicators show clear divergence across economies, so macro asset pricing still needs to focus on the combination of growth momentum, inflation stickiness, and policy response.

Risks

• The easing in financial conditions could reverse quickly if equity markets become volatile.
• CAI and short-run utilization diverge significantly across economies, so aggregate global indicators may mask regional risks.
• Sticky wages and core inflation may limit room for monetary easing.
• Fiscal impulse estimates depend on policy assumptions, and the U.S. indicator also includes tariff-like tax effects.
• Some CAI figures include forecast values before all data are released, so subsequent actual releases may lead to revisions.

What to watch

• Whether South Korea's FCI continues to ease and whether the tech stock rally extends.
• Changes in the contributions from stocks, rates, FX, and credit within global ex-Russia FCI.
• Subsequent revisions to China and Japan CAI and the divergence in regional growth momentum.
• Changes in GDP and inflation forecasts for 2026 and 2027 relative to consensus.
• Whether wage trackers, job-labor gaps, and trimmed core inflation show renewed upward inflation pressure.