Korea's GDP climbed to 3.5%

But still a tad lower than long term trend of 4%.

According to DBS, the first quarter GDP (preliminary,released this morning) came in at 3.5% QoQ saar, a notable rise compared to 1.3% in 4Q12, and higher than market consensus of 2.8%.

Here's more:

Exports and investment both increased strongly on the QoQ basis (13.4% and 12.2% respectively, up from -5.1% and -9.4%). Private consumption growth dropped on the other hand (-1.0%, down from 3.4%), as cold weather temporarily dampened outdoor activities and some of the fiscal stimulus measuresrolled outin 2H12 have already expired.

The 3.5% growth in 1Q remained a tad lower than the long term trend of 4%. The latest PMI data in G2 and China (April,flash)suggest that the global economic softness in 1Q is spilling over into 2Q.

This increases uncertainties for the short-term export outlook. Korea’s Apriltrade and PMI data to be released next week will be importantto watch. We willreview the whole year GDP forecast after gathering more information aboutthe second quarter.

Still, we are not particularly concerned about the relative performance of Korea’s exports, as the won remains far from overvalued and the non-price
competitiveness of Korean exporters is strong.

We also continue to expect domestic demand to pick up in 2Q-4Q, aided by the government’s supplementary budget KRW 7.3trn, 0.6% GDP) and credit easing by the central bank.

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