, Korea

Korea's industrial production slips to 0.3%

New orders, sales, production and operation ratio have also deteriorated.

Weaker prospects dominate stocks, employment and economic conditions. The finance ministry and the central bank have insinuated that their GDP forecasts for 2012 will be cut from the current levels of 3.7% and 3.5% respectively – probably getting closer to DBS' estimate of 3.1%.  

Here's more from DBS:

Industrial production is projected to slow to 0.3% MoM sa, down from 0.9% in the previous month. Business sentiment has dropped to the same low levels as in 3Q11, when European crisis worsened last year and US rating was also downgraded. And the BSI subcomponents of new orders, sales, production and operation ratio have broadly deteriorated. The latest data showed that consumers have also started to feel the impact of global slowdown.

Consumer confidence fell 4 points in June, owing to the weaker prospects of stock valuation, employment and general economic conditions. With exports and domestic demandboth slowing, GDP growth should stay well below the trend rate of 4% in 2Q andwill probably remain so in 3Q. The finance ministry and the central bank recently have both signaled that their GDP forecasts for 2012 will be cut from the currentlevels of 3.7% and 3.5% respectively – probably getting closer to the estimate of 3.1%.

The good news is that inflation pressures are fading, thanks to the declines in oil prices, as well as the government’s subsidies provided on social welfare. The Brentcrude oil prices plunged as much as 23% since end-April, while the won-denominated import oil prices have also dropped by about 20%. June’s CPI inflation numbers to be released next Monday are expected to post 2.3% YoY, further down from 2.5% in May. Thanks to the easing burden of living costs,consumer confidence currently remains higher than the neutral level of 100,suggesting that the consumption outlook is not entirely bleak.

The drop in oil prices is also positive for the external balance. A $10 drop in crude prices is estimated to boost Korea’s trade balance by US$ 0.6bn on the monthly basis. Meanwhile, due to the slowdown in inflation and the increasing expectations of a possible rate cut, foreign inflows into Korea’s bond market have surged recently. Foreign net purchase of Korean bonds excluding maturity redemptions amounted to KRW 5.5trn so far this month, more than doubling from KRW 2.2trnin May. The improvement in the external balance of payments should, in turn, help stabilize the won exchange rate.

Join Singapore Business Review community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!