Korea's 1% industrial output gain surprises peers

It was stronger than expected.

According to Nomura, of the nine economists surveyed by Bloomberg ahead of the data release, the firm was the only house to expect a positive monthly gain in December industrial output – and the actual print of 1.0% (sa) m-o-m was even stronger than we expected. 

Both export and domestic shipments gained while the inventory/shipment ratio fell. Retail sales fell, but business and construction investment gained markedly.

Here's more from Nomura:

Sequential growth momentum clearly shows that output has bottomed since September 2012. Improvements in both consumer and business confidence in January suggest that momentum of the growth recovery has carried over from Q4 into Q1.

In particular, we forecast exports (in USD value terms, due out on Friday) to surge 23.0% y-o-y in January (Consensus: 10.9%), from a 5.7% drop in December, partly due to a positive base effect from more working days because of the Lunar new year holidays.

Even taking the working-day adjustment into account, we still expect underlying export growth to rise to 12.6% y-o-y in January from 7.5% in December, as global demand – especially from the US, China and ASEAN – continues to recover.

We firmly believe that a stronger KRW is a reflection of improvements in global growth and the risk backdrop. We view recent movements in the KRW/JPY cross-rate as a process of normalisation.

That said, Korean exporters still enjoy price competitiveness, albeit by not as much as they did during the post-2008 crisis.