Sun, Jan 02, 2011 - Page 11 News List

Upbeat data from South Korea boost case for rate rise

nice figures:Sales rose strongly to almost all regions except for EU markets, with oil products, steel products and cars the hottest-selling items

Reuters, SEOUL

South Korea’s exports last month exceed forecasts, rising to a record level as demand picked up in almost all regions, data showed yesterday, adding to the case for additional interest rate increases from as early as next month.

The data released by the world’s seventh-largest exporter also eases concerns the global economy could slip back into a slump on the stubbornly high US unemployment figures and the fallout from Europe’s debt crisis.

Analysts said the figures, along with Friday’s data showing a pick-up in inflation last month, would easily offset any economic fallout from the heightened tension with North Korea and persuade the central bank to keep raising interest rates.

gathering pace

“Strong exports will certainly prevent the [South Korean] economy from slowing rapidly while inflation is gathering pace. So I don’t see any problem with the view of more interest rate increases ahead,” said Park Sang-hyun, chief economist at HI Investment & Securities. “I think the Bank of Korea will raise the rate in February at the earliest.”

Exports grew 23.1 percent to a record US$44.34 billion last month from a year before, while imports increased 23.3 percent to US$40.60 billion, producing a trade surplus of US$3.74 billion, the Ministry of Knowledge Economy data showed.

All figures are provisional.

The median forecast from a Reuters survey of analysts were for exports to rise 19.1 percent last month from a year earlier and imports by 20.4 percent. Forecasts for export growth ranged from 16.1 percent to 23.6 percent.

hot sellers

Sales rose strongly to almost all regions, except for the EU markets hit by a fiscal crisis, and oil products, steel products and cars were the hottest selling items, the ministry data showed.

The average export value per working day — a useful measure of monthly changes as the country does not provide seasonally adjusted figures — rose to US$1.81 billion last month from a revised US$1.72 billion in November.

Government data showed on Friday consumer inflation rose to an annual rate of 3.5 percent last month from November, defying the median forecast for slowdown in a Reuters survey.

solid growth

Solid economic growth and signs of rising inflation prompted the Bank of Korea, the central bank, to raise interest rates twice last year.

It last raised the benchmark interest rate in November by 25 basis points to 2.50 percent and next reviews the rate on Jan. 13.

South Korea was among the top performing economies in the Organization for Economic Co-operation and Development group last year and is tipped to be one of the top three this year.

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