Economic Takeaways From South Korea's Trade, Inflation Data

What you need to know about the economic data released Tuesday in South Korea:


  • Exports fell 4.7 percent in November from a year earlier (-9 percent forecast). Exports for the year to date are down 7.4 percent compared with the same period last year.
  • The trade surplus of $10.4 billion was a record high, as imports fell more than exports.
  • Sales of key export products were mixed, with vessels jumping 134 percent and telecommunication devices gaining 24 percent, while steel fell 27 percent and machinery dropped 14 percent. Meanwhile, cosmetics exports, which the government sees as a growth area, rose 50 percent.
  • Sales to China, which accounts for about a quarter of Korea’s overseas sales, fell seven percent. Sales to the U.S. dropped 12 percent and to Japan were down 19 percent. Sales to the EU jumped 52 percent.

The takeaway: The better-than-expected exports performance in November could be temporary. The trade ministry said the rate of decline is likely to accelerate in December. Finance Minister Choi Kyung Hwan said this month that exports have started to affect production and investment. Weaker exports -- especially to China, Korea’s neighbor and largest trading partner -- could bolster the views of economists who have called for lower interest rates to support the economy and make the exchange rate more competitive.

What economists said: “Better-than-expected exports were driven by gains in vessels, which tend to be very volatile depending on when the sales of ships are reflected in the data,” Stephen Lee, an economist for Samsung Securities Co., said after the data was released Tuesday. “We can’t say Korea exports have turned around with just this month’s figure.”


The consumer price index rose 1 percent from a year earlier (0.9 percent forecast).

  • Core CPI, which excludes oil and agricultural products, rose 2.4 percent from a year earlier.
  • Inflation was 0.65 percent, from January through November, below the Bank of Korea’s 0.7 percent forecast for 2015. The central bank has cut its CPI forecast to 0.7 percent from 0.9 percent in October.

The takeaway: While the benchmark CPI rate rose at the fastest pace in a year, inflation remains well below the central bank’s target of 2.5 percent to 3.5 percent, as it has since 2012. Still, the pick-up in core inflation shows that the underlying trend in prices is improving, which builds a case for delaying any interest rate cuts amid the slump in exports.

What economists said: “Inflation won’t reach the BOK’s target any time soon,” Baek Da Mi, a research fellow at Hyundai Research Institute, said by phone after the data was released. “Prices are rising but it does not change the whole picture where uncertainties in the growth path and falling exports are keeping the benchmark interest rate low.”

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