2% slip looms over Korea's industrial production

Blame it on December's export contraction.

According to DBS, trade, inflation (January) and industrial production data (December) for Korea will be released this week. The firm projects industrial production to fall -2.0% MoM sa in Dec12, down from 2.3% in Nov12. This was in line with the export contraction in Dec12 and the lower-than-expected GDP growth in 4Q12.

The drags to December exports and production were temporary, due to the unfavorable working day effects and cold weather conditions.

Here's more from DBS:

January’s trade data will likely show a rebound in exports. It is true that exports registered a decline of -9% YoY in the first 20 days of Jan13. Note that, however, shipments in Jan12 were front loaded as a result of the early-arrival of the Lunar New Year last year.

The comparison base for the first 20 days of Jan13 is high. For the whole month of Jan13, we forecast export growth of 5.7% YoY, up from -5.7% in Dec12.

Inflation remains a non-issue, given the modest recovery in domestic demand and the appreciation of the KRW. Headline CPI is likely to remain benign at 1.7% YoY in Jan13, compared to 1.4% in Dec12.

In addition, trade surplus is expected to narrow temporarily in Jan13, due to seasonal factors.