Economic data from South Korea and Japan yesterday painted very different pictures about the health of two of our major export markets.
While Japanese exports did better in June than forecast, the South Korean economic saw its slowest growth in six years, according to early figures on GDP performance.
That news was the standout data from Asia yesterday and it raises the prospect of another rate cut from the Bank of Korea which is battling to stop the economy from coming to a halt.
South Korean economic growth more than halved in the second quarter from the first to record the weakest expansion in six years, thanks to the outbreak of Middle East Respiratory Syndrome (or Mers), dry weather and weak exports.
The central bank said the economy grew just 0.3% in April-June from the first quarter, when growth was 0.8%. It was the weakest growth since the 0.1% rate in the first quarter of 2009.
The economy grew by 2.2% in the year to June, down from the 2.5% in the 12 months to March as household spending fell thanks to the outbreak of Mers which has killed 36 people. Tourism fell sharply and trimmed GDP by 0.1%, according to the central bank
The Bank of Korea has already responded to slow down and the impact of Mers by cutting interest rates for a 4th time since last August to a record low of 1.5%.
It has cut its GDP forecast for 2015 to 2.8% (meaning there has to be a very strong rebound in the third and 4th quarters, which is hard to see at the moment.
But there was slightly better news from Japan’s trade figures for June.
Exports jumped by 9.5% in June after a 2.4% rise in May, but imports were again weak (for a 6th month in a row), thanks to falling commodity prices (especially for oil, coal and LNG) .
The trade balance was a deficit of 69.0 billion yen ($556.54 million), worse than forecasts for a 5.4 billion yen surplus.
In volume terms, exports were flat in June, after falling 3.8% in the previous month. Exports to China rose 5.9%, while those to the US jumped 17.6%.
The rise in exports resulted partly from the weakening of the yen over the 12 months to June.
The dollar was trading around Y124 at the beginning of June compared with around Y101 a year earlier.
The fall in imports was due to the fall in commodity prices – especially for energy, more than offsetting the all in the yen 9which lifts the cost of imports).
