, Korea

Korea business confidence slumps to four-year low

Blame it on exports and domestic shipments falling sharply with new orders.

According to Nomura, the Bank of Korea‟s (BOK) business confidence index plunged to a four-year low of 71 in July from 82 in June. Exports and domestic shipments fell sharply, as did new orders. The plunge in the business confidence index suggests that Korea‟s exports and imports will also fall sharply in July.

Here's more from Nomura:

We now expect Korean exports (USD custom basis, released on Wednesday morning) to fall 9.1% y-o-y in July after a 1.1% gain in June. Reflecting weaker domestic demand, we expect imports to fall 4.7% y-o-y, resulting in a USD2.3bn trade surplus in July.

We see further downside risks to our 2.5% GDP growth forecast for 2012, which is already at the bottom of the consensus range. Our baseline call is that the BOK will cut policy rates again by 25bp to 2.75% in October, but there is a risk that the BOK moves earlier.

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