South Korea's recovery is taking time, but picking up in pace

The figures also showed consumer spending continuing to pick up.

Gross domestic product (GDP) rose by a seasonally adjusted 1.8% in the three months to the end of September, up from growth of 1.2% in the previous quarter.

Analysts said the central bank, which lifted its interest rates for the first time in three years, may move again.

"The data will surely make people think that the chances have risen for a second interest rate hike taking place within this year," said Oh Suk-tae, an economist at Citibank.

Overall trend

Manufacturing grew by 3.1% during the quarter, with exports up by almost 14% thanks to strong demand for chips, mobile phones, and petrochemical products.

Private consumption, the main driver of Asia's fourth-biggest economy, increased by 1.2% in the quarter.

Korea's annual rate of growth was 4.4%, up from expansion of 3.3% in the second quarter.

"Given this trend, the overall GDP growth rate will be 3.8% for this year as the central bank has forecast," said statistician Kim Byeong-Hwa.

The question now is how fast and how high interest rates will rise

The one dark spot in the report was slower growth in the construction industry, which may delay any action by the central bank, analysts said.

"The weak construction sector may make the central bank hesitate before delivering another hike in interest rates because the industry is very sensitive to interest rate levels."

Balancing act

Earlier this month, the Bank of Korea lifted its benchmark interest rate by a quarter of a percentage point to 3.5% from 3.25%.

It was the first time it had lifted borrowing costs in more than three years and came after record oil costs had stoked up inflationary pressures.

Even so, the bank has to be careful not to snuff out the recovery.