South Korea Exports, Inflation Miss Expectations in OctoberBy
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.
- 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
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.
- “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