South Korean trade and inflation data for August is set to release tomorrow. According to a DBS Bank research report, exports are likely to have continued to contract for the 10th consecutive month by 12.4 percent year-on-year. Excluding the seasonal factors caused by Chuseok festival, fundamentals are expected to have softened, in the context of the ongoing deceleration in global growth, rise in South Korea’s trade frictions with Japan, and unresolved trade tensions between China and the U.S.
Meanwhile, the headline inflation is likely to have dropped into the negative territory, recorded a fall of 0.3 percent year-on-year in September. In spite of the rise in global oil prices and the reported cases of African swine fever in South Korea, the high base effect and soft domestic demand might possibly have exerted downward pressures on inflation.
“Sluggish trade and inflation figures point to the chances of a further rate cut from the Bank of Korea, as soon as the upcoming policy meeting on 16 October”, added DBS Bank.
