South Korea's IP probably rose further

South Korea's industry data shows that auto production increased for the second consecutive month in July based on the seasonally-adjusted series. Year-on-year growth probably declined from 1.2% in June to -2.5% in July despite positive mom growth, partially because of negative base effects (mom growth in July 2014 was 1.6%). 

"South Korea's IP is likely to have extended its recovery momentum in July after the sizeable turnaround in June. July trade data suggests that non-electronics sectors such as chemical and metal products outperformed the electronics sector", says Societe Generale.

Sustained recovery in industrial production would be good news for near-term growth momentum. But a positive sign in July industrial production should be taken with a grain of salt. Firstly, the relationship between GDP and industrial production has not been restored yet. 

"In Q2 2015, manufacturing production in GDP rose by 0.8% qoq, while industrial production fell by 1.0% qoq. Secondly, a renewed slump is expected in exports inAugust", added Societe Generale.