Korea suffers sinking growth

As industrial production slipped for three straight months.

According to DBS, growth is falling further. Industrial production shrank -0.7% MoM sa in August, the third consecutive month of contraction. On the demand side, the drags mainly came from exports and investment.

Here's more from DBS:

Producers’ shipments for exports have fallen for three consecutive months since June. Equipment investment already peaked in January and it plunged in August.

It is doubtful whether the sharp deterioration in industrial activity could be fully explained by the strikes in automobile industry and the two typhoons in August.

Production, exports and investment in the electronics sector also fell significantly. The inventory-to-shipment ratio (1.16) and the manufacturing operation ratio (73.8%) have both worsened to the levels as witnessed in Oct08 or Dec11.

Unless a V-shaped recovery emerges in September, the quarter-on-quarter growth in industrial production will be in the negative territory in 3Q.

If assuming the output growth in industrial, services and construction sectors all return to the potential rates in September, our regression models show that the 3Q GDP growth will be only 1.1% YoY or -1.5% QoQ saar.

Alarmingly, the leading indicators including machinery orders and construction orders deteriorated further in August, suggesting that the ongoing downtrend could continue in September.