South Korea Exports, Inflation Miss Expectations in October

Updated on
  • Exports rose 7.1 percent, less than half the forecast pace
  • Data raise doubts about chance of rate hike in November

South Korea’s exports expanded at a slower pace than expected in October, affected by a national holiday that lasted more than a week. Inflation weakened slightly but remained near the central bank’s 2 percent target.

Key Points

  • Exports jumped 7.1 percent in October from a year ago, after a double-digit expansion in every previous month this year. The median estimate of economists was for a 15.6 percent increase
  • Imports gained 7.4 percent, leaving a trade surplus of $7.3 billion
  • Consumer prices rose 1.8 percent in October from a year earlier, compared with the median estimate for 1.9 percent gain
  • From the previous month, prices fell 0.2 percent, versus a median estimate of no change
  • Core inflation rose 1.3 percent in October from a year earlier

Big Picture

The data may prompt a rethink among some economists after the fastest growth since 2010 strengthened the view that the central bank would raise the benchmark interest rate as soon as Nov. 30. While a sustained export recovery is supporting growth, even a small slowdown in core inflation may prompt caution at the Bank of Korea about a rate hike. Governor Lee Ju-yeol told lawmakers on Tuesday that the central bank needs to check price movements, including core inflation, before raising rates.

Economists Takeaways

  • “Export growth in October wasn’t bad considering fewer working days, and it indicates domestic demand will recover as exports remain strong,” said Lee Sang-jae, an economist for Eugene Investment & Securities in Seoul.
  • “But the stabilizing of inflation raises the question of whether a rate hike is urgent, and could give the central bank some room to wait and monitor the data trend,” Lee said. 
  • "Inflation is stabilizing after temporary factors like agriculture prices fade," said Park Sang-hyun, chief economist for HI Investment & Securities in Seoul. "Overall, I think the data support the case for a November rate hike."


  • Exports grew again despite 4.5 fewer working days in the month compared with a year earlier, the trade ministry said in a statement
  • Overseas shipments to China rose 13.5 percent in October from a year earlier, while those to the U.S. and Japan fell 12 percent each.
  • Semiconductor shipments rose 70 percent.
  • Inflation in October slowed compared with the previous month as vegetable prices stabilized and the base effect from electricity fee cuts in July-September 2016 disappeared, the finance ministry said in a separate statement
  • The ministry said inflation will continue on the current stable trend as a lowering of city gas prices limits the upside, but it could be disrupted by volatility in global oil prices

— With assistance by Myungshin Cho

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