Korea industrial production to dip 0.7%

Blame it on the sluggish external and domestic demand.

According to DBS, industrial production is expected to drop -0.7% MoM sa. Both external demand and domestic demand were sluggish in July. Exports fell -3.5% MoM sa. Equipment investment should have also contracted, as the leading indicators (machine orders and capacity utilization) continued to point south.

Here's more from DBS:

Meanwhile, construction investment is expected to remain depressed in July, in line with the weakness in property market indicators including property transactions and mortgage lending.

The major support to output growth should come from consumption. The labour market is stable and inflation pressures have eased to help restore consumers’ purchasing power, which helped to offset the negative wealth effects resulting from the sluggishness in stock market prices and property prices.

July’s data is backward looking. More attention will be given to the economic data in August. As the first piece of data for August, the custom trade report is likely to disappoint. We expect exports to contract -8.6% YoY in August, a similar rate of decline compared to -8.8% in July. The flash PMI in China fell to 47.8 in August from 49.3 in the previous month, dampening the hope of a quick recovery in the Chinese economy. Adding to this is the unfavourable seasonal effects caused by the summer vacation in the local manufacturing industry. Trade statistics in the first 20 days of August showed that trade balance was in a deficit of USD 4.5bn. We expect trade balance to register a deficit of USD 0.2bn in the full month.