Korea's growth bottoming out

Industrial production rose 0.8% MoM sa in September.

DBS Group Research noted:

The latest set of economic data confirmed our assessment that growth is bottoming out in Korea. Industrial production rose 0.8% MoM sa in September, turning positive for the first time after falling for three consecutive months since June. Producers’ shipments for exports, manufacturing operation ratio and equipment investment index broadly improved, albeit modestly.

October’s data further support our view of a growth rebound in 4Q. Exports increased 1.2% YoY in October, the first positive growth seen since June. Manufacturing PMI rose 1.7ppt to 47.4 in October, up from the trough of 45.7 in September.

On the price front, CPI inflation remained benign at 2.1% YoY in October (versus 2.0% in Sep). The normalization of food prices, the appreciation of the won, and the weakness in demand-side price pressures should help to keep inflation stable, at about 2% in 4Q12-1Q13.

The nascent improvement in growth data would alleviate the pressures facing the central bank to further loosen monetary policy. As inflation remains tame, a resumption of monetary tightening is still a remote possibility. The BOK is expected to hold rates steady at the MPC meeting next week.

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