Korea's industrial output edged up a measly 0.2% in July

And August's numbers could only weaken further.

All industries output, which includes industrial and service output, construction works and government spending, increased 0.2% (sa) m-o-m in July after a 2.2% gain in June, lifting the year-over-year growth rate to 2.7%.

According to a research note from Nomura, demand-side data for July were mixed, as retail sales and business investment gained, but export shipments and construction worked declined.

The manufacturing inventory/shipment ratio continued to rise to 122.8 in July, the fourth-highest reading since the 2008 crisis (behind 129.5 in December 2008, 126.6 in November 2008 and 126.1 in January 2009).

Here’s more from Nomura:

Looking ahead, we expect industrial output to fall in August as the business confidence index fell to 72 from 74 in July.

Indeed, we expect exports (USD custom basis) to decline by 1.8% y-o-y in August after a downwardly revised 5.4% gain in July.

Aside from the technical factors (e.g., fewer working days), weaker electronics exports appear the main reason.

Overall, we see downside risks to our Q3 GDP growth forecast (1.2% q-o-q, 3.7% y-o-y) and therefore see the risk of another 25bp rate cut to 2.00% in Q4 2014, against our baseline call for a lengthy pause before delivering the first rate hike back to 2.50% in Q4 2015.