Here's why Korea can't be hopeful of recovery in exports

Industrial production is forecasted to rise by a measly 0.9%.

According to DBS, industrial production for August (due Friday) is expected to rise a modest 0.9% MoM sa, up from -1.6% in July. The key indicators including export shipments, PMI and machinery orders didn’t worsen further in August.

Here's more from DBS:

Despite the tentative signs of stabilization, there is no evident yet to show that a meaningful recovery in exports and industrial activity is underway. China’s flash PMI was little changed in September versus August and it remained well below the neutral reading of 50.

Although Korea’s exports reported a positive growth of 7.9% YoY in the first 20 days of September (vs. -12.4% in the same period of August), it was distorted by the holiday effects – the Chuseok holiday fell in early-September last year but end-September this year. Exports in the full month of September are still expected to contract (DBSf: -5.2% YoY).

In the domestic economy, we expect a moderate rebound in consumption in 2H12. Many of the recent policy measures focus on supporting the household sector, such as the increases in government spending prioritizing social benefits, the cuts of consumption tax on automobiles and expensive electronics.

That said, the property market – an important driver of consumption – remains sluggish. Property transactions and housing prices have continued to slide in August, despite lower.

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