, Korea

Why Korea's economy is still gaining momentum despite weak numbers

Inflation is only at 1.3%.

According to DBS, Korea's February/March economic data have remained weak. Industrial production fell -0.8% MoM sa (Feb). Exports grew less than expected by 0.4% YoY (Mar). 

However, DBS noted that CPI inflation came in lower than the consensus forecast at only 1.3%YoY (Mar). That said, DBS thinks the broad economic situation is stronger than the trade/production numbers are stating.

Here's more:

All-industry output held up better than industrial production (1.2% in Feb), thanks to the steady growth in services output and rebound in construction works.

In the YoY terms, industrial production fellto -0.9% on average in Jan-Feb from -0.1% in 4Q12, but all-industry output(which tracks closely with real GDP) rose to 0.6% from 0.1% during the same period.

Moreover, it seems industrial activity is also regaining momentum in March/April. Manufacturing PMIrose to 52.0 in March,the highestin a year. New export orders rose atthe fastest pace in two years, and the increase in manufacturing production wasthe strongestsince Apr12.

On the price front, the slowdown in March inflation mainly came from price declines in food (the weather-sensitive vegetable prices) and education services
(due to the expansion of childcare subsidies).

If without the distortions of governmentsubsidies and seasonalfactors, inflation would have risen to about 2% in March.

We believe the economy is still on track to a cyclicalrecovery, although a notable improvement in growth figures has been delayed to March/April.

On account of the possibility of a weaker-than-expected 1Q GDP,the government recently cutthe 2013 growth forecastto 2.3% from 3.0%.

The government’s inflation forecastfor 2013 has also been lowered to 2.3% from 2.7%, in part reflecting the subsidy effects.

The Bank of Korea may also revise its annual economic forecasts at next week’s policy review, probably lowering the growth estimate towards 2.5% from 2.8%, and adjusting the inflation estimate towards 2.0% from 2.5%.

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!