South Korean shares closed lower on Friday as investors looked forward to a key US inflation reading for July scheduled to be released later in the day.

The US personal consumption expenditures (PCE) price index data is crucial as it would give a clue about the US on the Federal Reserve's interest rate trajectory at its rate-setting meeting in September. The CME FedWatch Tool indicates an 88% probability of a 25-basis-point rate cut next month.

The Korea Composite Stock Price Index or Kospi fell 10.31 points, or 0.3%, to end at 3,186.01. The Kosdaq also decreased by 1.52 points, or 0.2%, to close at 796.91.

In economic news, South Korea's overall industrial output increased 0.3% in July, following a 1.7% gain in the previous month, according to data from Statistics Korea released Friday.

The public administration and service industry indices rose in July from the prior month, while those for construction declined.

Total industrial production increased by 5% in July from the same month last year, after a 1.6% yearly rise in June.

In other economic news, the aggregate assets of savings banks in South Korea declined 1.8% to 118.8 trillion won in the January-June period from 2.1 trillion won as of end-December 2024, the Financial Supervisory Service said in a Friday release.

Despite the decline in assets, savings banks' net income rebounded to 257 billion won from a loss of 395.8 billion won a year earlier, which was due to a decline of 685.7 billion won in bad debt expenses, according to the release.

The delinquency rate on loans of the savings banks declined 0.99 percentage points to 7.53% in H1 from 8.52% as of end-December 2024.

In corporate news, SK Telecom (KRX:017670) and SK Ecoplant held a groundbreaking ceremony for the SK AI Data Center in Ulsan on Friday, the telecommunications company said in a Friday press release.

The new center will be the largest AI-only data center outside the metropolitan area in South Korea.

The new AI data center features key AI computing systems, hybrid cooling, and high rack density, delivering better performance to existing facilities. The project is expected to boost the country's AI industry while supporting regional and national economic growth.

Shares of SK Telecom fell more than 1% at market close.