Korea's industrial production dipped 1.8% in February

Destocking dragged output growth.

According to DBS, destocking is acting as a drag on Korea's output growth. Industrial production fell more than expected by -1.8% MoM sa in February.

Here's more:

Combined with the services and construction sectors, all-industry output also slipped -1.2%. The inventory-to-shipments ratios have remained elevated in the manufacturing sector as of February, indicating that the destocking process is not over and will continue for some months.

On the demand side, leading indicators still signaled an expansion in economic activities ahead. Consumer confidence stayed firmly above the neutral mark at 108 in March. Construction orders increased 33.5% YoY in Jan-Feb, a faster pace than 21.9% in 4Q13.

Export growth has also picked up to 7.7% YoY in the first 20 days of March, up from 3.8% during the same period of Jan-Feb. Due to the drag of inventory destocking, chances are increasing that GDP growth will slow notably in 1Q. As the final demand in the economy remains steady, the 1Q slowdown should be seen as temporary and the outlook ahead should remain largely unaffected. Our full-year GDP forecast stands unchanged at 3.5%.