Why you shouldn't expect too much from Korea's export figures

Only 1% jump has been penciled in.

According to DBS, industrial production (March) and trade, PMI and inflation numbers (April) are due this week. Industrial production should have picked up in March (DBSf:1.3% MoM sa), as inferred from the rise in 1Q GDP and the uptick in March PMI.

April’s trade and PMI data, which foretells the 2Q outlook, may not produce encouraging results however. Exports in the first 20 days of April reported a drop
of -3.1 YoY. Unless shipments accelerated strongly in late-April, otherwise the full month export growth should only show a small YoY rise (DBSf: 1.0% YoY).

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Meanwhile, given the synchronized slowdown in April flash PMI in China, US and Europe, Korea’s PMI may also retreat from a strong 52.0 in March. CPI inflation, on the other hand, is projected to stay stable and low at 1.4% YoY in April (1.3% in March).

This thanks to the weakness in demand-pull price
pressures, the slump in global crude oil pricesin April, and the expansion of the government’s welfare subsidy program.

Overall,there are such concernsthatthe economic softnessin 1Q isspilling over into 2Q, and a notable recovery would be delayed to the second half ofthis year after the global economy improves and domestic fiscal stimulus starts to work.

Still, compared to the central bank’s conservative forecast of 2.6% GDP growth in 2013,the downside risks are low. We expectthe BOK to stay on hold at May’s meeting.