Forex Flash: South Korean Q1 GDP looks stronger than Q4 - Nomura

FXstreet.com (Barcelona) - Nomura economist Young Sun Kwon is expecting a modest improvement in growth and he sees no immediate need for a supplementary budget. Nevertheless, should it come, he feels that it would support GDP growth and therefore reduce the need for a rate cut.

He begins by noting that Korea´s industrial electricity consumption increased by 0.5% YoY in January and February combined following a 0.9% gain in Q4. He is now forecasting January-February Industrial output to rise by 0.7% YoY after a 0.1% drop in Q4. Seasonally adjusted industrial output should gain 2.0% MoM in February, more than offsetting the 2% decline in January. In terms of Industrial output, Young believes that this should increase further as he expects export growth (USD custom basis) to rise to 3.0% YoY in March from 0.6% in January-February combined, supported by solid demand from the US, China and South Asia. He adds that working-day adjusted daily export growth should jump to 7.6% YoY in March from 1.7% in the previous two months. From an economic perspective, he is not expecting incoming macro data to suggest the need for a supplementary budget. However, he writes, “For whatever reason, if the government formulates an extra budget, it would support GDP growth, and therefore reduce the need for a rate cut. We maintain our call for no rate cuts through 2013.”