S. Korea Sep CPI rise 2.3% from year ago

Oct 2, 2007 - South Korean consumer prices in September rose 2.3 per cent from a year earlier, data showed on Tuesday, accelerating from August but slightly missing expectations ahead of a central bank policy review next week.

The median forecast in a Reuters poll was for the CPI to rise 2.4 per cent from a year earlier, accelerating sharply from growth of 2.0 per cent in August.

Annual inflation has held at or below the low end of the Bank of Korea's 2.5-3.5 per cent target range after it averaged 2.2per cent in 2006.

The consumer price index rose a non-seasonally adjusted 0.6 per cent in September from August, picking up from a monthly gain of 0.1 per cent in August, the data from the National Statistical Office showed.

The annual rate of core inflation, which strips out volatile food and fuel prices, held steady at 2.3 per cent in September.

The Bank of Korea held interest rates steady in Septemberafter raising them by a quarter percentage point each in August and July to a six-year high of 5.0 per cent.

The Bank of Korea reviews interest rates on Oct 11.

S Korea's Aug current account surplus widens

Oct 2, 2007 - South Korea's current account surplus widened to a seasonally-adjusted US$1.83 billion in August from a revised US$1.69 billion surplus in July, central bank data showed on Tuesday.

For the first eight months of the year, South Korea's current account produced a seasonally-adjusted surplus of US$4.85 billion, compared with a US$1.52 billion surplus for the same period in 2006, the Bank of Korea data showed.

The data also showed that South Korea's overseas borrowing rose by a net US$7.85 billion in August after a net gain of US$6.00 billion in July.

S Korea holds rates steady citing turbulent markets

Sep 9, 2007 - South Korea's central bank held interest rates steady on Friday, as expected, saying inflation remained under control and it had to watch turbulent markets, convincing investors rates would stay on hold for some time.

The central bank left its overnight call rate target at a six-year high of 5.0 per cent after raising rates in July and August. The Bank of Korea joined several other major central banks that have kept borrowing costs steady in the face of global market turmoil.

Treasury bond futures prices jumped as much as 13 ticks after comments by Governor Lee Seong Tae bolstered market expectations that interest rates would not go up any time soon.

'The turbulence in international financial markets has not had any direct impact to the domestic economy,' Mr Lee told reporters. 'But there still is a good chance that international financial markets will become turbulent again.' All 11 economists recently surveyed by Reuters predicted rates would stay unchanged this week and a clear majority saw rates on hold until the end of the year.

The central bank cited its concerns that rapid credit and money supply growth would stoke inflation in the future as the main reason behind its rate increases in the past two months and earlier moves to tighten bank reserves.

But even as the central bank said it expected inflation to creep up in months ahead and the economy to maintain its growth momentum, its governor voiced confidence the bank had it under control.

Data published earlier this week showed that growth in Korea's broad money supply measure slowed in July while annual inflation in August came in at 2.0 per cent, below forecasts and the bottom of the central bank's 2.5-3.5 per cent target range.

Bank of Korea's decision came after several banks that only a month ago were widely expected to raise borrowing costs, decided to keep their rates on hold. The European Central Bank, the Bank of England and central banks in Australia and Canada all kept their benchmark rates steady this week.

S. Korean Money Supply Growth Eases In July

Sep 4, 2007 - South Korea's L money supply grew at a slower pace of 12.1% annually in July, the Bank of Korea said Tuesday. The growth rate slowed from the 12.7% recorded in the prior month. The broad liquidity amounted to 1,951.4 trillion won at the end of July. On a monthly basis, money supply improved 0.1%.

S. Korean Aug. Trade Surplus At US$1.5 Bln, Exports Up 14.4% Annually

Sep 3, 2007 - South Korean exports advanced 14.4% annually in August, a government report showed Monday. Economists were looking for an annual growth of 14.7%. Exports amounted to 31.2 billion dollars in August. Imports advanced 9.8% to 29.7 billion dollars, resulting in a trade surplus of 1.5 billion dollars.

S. Korean Aug. CPI Up 2.0% Annually, Rises 0.1% On Month

Sep 3, 2007 - South Korea's consumer prices climbed 2.0% year-over-year in August, the National Statistical Office said Monday. The number came in weaker than the expected rise of 2.3%. On a monthly basis, consumer prices were up 0.1%.

S. Korea Revises Up Q2 Economic Growth

Sep 3, 2007 - The South Korean second quarter economic growth underwent upward revision, the latest official data indicated Monday. The economy expanded at its fastest pace in three and a half years in the second quarter, driven by robust exports as well as manufacturing and service sector growth.

The Bank of Korea revised up the sequential economic growth for the second quarter to 1.8% from the 1.7% initially estimated. The GDP growth accelerated from the 0.9% seen in the first quarter.

The real GDP improved 5.0% annually, revised up from the 4.9% estimate released on July 25. The economy expanded 4.0% in the first quarter and the fourth quarter of 2006. The central bank retained its GDP growth forecast at 4.5% for the whole year of 2007.

The manufacturing sector advanced 3.6% sequentially, reversing a 0.9% fall recorded in the first quarter. The growth was driven by the strength in semiconductors, industrial machinery, ships and automobile manufacturing.

Meanwhile, service sector growth climbed at a rate of 1.3% on account of strong growth in financial intermediation. The construction sector dropped 1.8% as both building construction and engineering declined from the prior quarter. Agriculture, forestry and fishing sector growth eased to 0.7% from the 1.8% growth in the first quarter.

Private consumption growth slowed to 0.8% from the 1.5% increase logged in the prior quarter. The central bank noted that the decline in expenditure on durables was partially offset by a gradual growth in non-durable spending. Facilities investment grew 3.4% from the previous quarter.

Exports of goods moved up 5.2% on higher exports of semi-conductors, industrial machinery and shipbuilding. This compares to a growth rate of 2.7% in the first quarter. The contribution of net exports to GDP growth was 0.3 percentage point, in contrast to a negative contribution of 0.8 percentage point in the prior quarter. On the other hand, contribution of domestic demand to GDP growth dipped to 0.9 percentage points from the 1.3 percentage points recorded in the prior quarter.

The real Gross National Income - GNI increased 2.2%, as net factor income from the rest of the world turned to rise. Annual GNI growth came in at 4.7%.

Separately, a government report showed that exports grew weaker than expected in August. Exports advanced 14.4% annually in August, while imports climbed 9.8%. Economists were looking for an annual growth of 14.7% in exports. Exports amounted to 31.2 billion US dollars and imports totaled 29.7 billion US dollars, resulting in a trade surplus of 1.5 billion US dollars. Exports to China increased 12.9% and shipments to the U.S. rose 3.3%.

Elsewhere, the National Statistical Office announced that the CPI annual inflation eased to 2.0% in August from a 2.5% rise seen in the prior month. The number came in weaker than the expected rise of 2.3%. The core inflation, excluding volatile items, remained at 2.3% annually in August. On a monthly basis, consumer prices were up 0.1%.

Meanwhile, the central bank is expected to hold key interest rate at 5.0% on its policy board meeting on September 7. In August, the Monetary Policy Committee of the Bank of Korea decided to raise the call rate target by 25 basis points to a six-year high of 5.0%. The Committee also raised the interest rates on both the Bank of Korea's Liquidity Adjustment Loans and Aggregate Credit Ceiling Loans by 25 basis points to 4.75% and 3.25%, respectively.

South Korea raises rates by 0.25%

Aug 9, 2007 - South Korea's central bank surprised markets Thursday by raising interest rates a quarter of a point to a six-year high of 5% to halt an acceleration in money supply growth that is fueling inflation.

The Monetary Policy Committee of the Bank of Korea decided today to raise the call rate target (uncollateralized overnight rate) by 25 basis points, from 4.75% to 5.00%.

The domestic economy seems likely to maintain its upward trend. While exports continue to post robust growth, investment and private consumption are increasing steadily.

Consumer price inflation remains stable despite the rise in international oil prices. The upward trend of real estate prices seems to have been contained.

In the financial markets, there is ample liquidity and financial institutions' lending continues to show a steady increase.

The Committee believes that, after this action, the degree of financial accommodativeness will be markedly reduced.

In a related action, the Committee also raised the interest rates on both the Bank of Korea's Liquidity Adjustment Loans and Aggregate Credit Ceiling Loans by 25 basis points to 4.75% and 3.25%, respectively.

Its first back-to-back monthly increase in rates sent stock and bond prices tumbling, although the markets recovered some ground after the Bank of Korea's governor suggested rates could now be put on hold for a while.

All 12 economists in a Reuters poll had expected the Bank of Korea to hold rates steady after a quarter-point rise in July, although most had forecast another increase later in the year.

"It is a big surprise. The Bank of Korea seems to be much more concerned over high liquidity than expected," said Park Sang-hyun, chief economist at CJ Investment & Securities.

"Liquidity is the key to monetary policy in the coming months. If the liquidity issue does not show signs of slowing down, the central bank will raise interest rates again, probably in October or November."

Central bank figures on Monday showed the broadest L money supply measure grew 12.7 percent in June from a year earlier, the fastest since a 12.9 percent gain in February 2003.

However, Governor Lee Seong-tae told reporters the central bank felt the cycle of seven rate rises from late 2005 had done much of its job in slowing money supply growth. He indicated the central bank would hold fire for a while to assess future money trends.

"We have raised the call rate target twice this year, three times last year and twice the year before, and I expect these to have an effect gradually over time," Lee told reporters.

"Even if liquidity growth does not change markedly in September, it will change gradually."

Treasury bond futures, which tumbled more than 50 ticks right after the decision was announced, recovered some of the losses to trade down about 30 ticks at 0527 GMT after Lee's remark on the effect of past rate increases.

On the Seoul stock market, the benchmark KOSPI index initially wiped out a 1.3 percent gain after the rate rise, then fluctuated, and was down 0.2 percent at 0520 GMT.

The won (KRW-) rose to 921.4 per dollar from Wednesday's close of 923.7 but slipped back to around 923 by 0525 GMT.

"I think the BOK advanced the timing of a rate hike that was already in mind and will stay on hold for the time being," said Ryu Seung-sun, an economist at Mirae Asset Securities.

"But it doesn't mean that the current cycle of tightening has concluded, because the expected effect from rate increases may not take place."

The Bank of Korea maintained its economic outlook, saying in a statement that Asia's fourth-largest economy was expanding thanks to brisk exports and a recovery in private consumption.

Government data released later underscored growing optimism among South Koreans about the economic outlook and their future living conditions, although yet another interest rate rise might take a toll in coming months.

The National Statistical Office's seasonally adjusted consumer expectation index, which measures how South Koreans feel about economic prospects and personal spending six months ahead, rose to a 19-month high of 103.8 in July from 101.2 in June.

The central bank affirmed its view that inflation would gather pace due to growing domestic demand and firmer raw material prices.

Annual inflation stood at 2.5 percent in July, which is at the bottom of the central bank's target for 2007-2009 of between 2.5 percent and 3.5 percent but above its forecast for this year of an average 2.4 percent.

Analysts have said the central bank's confidence that economic growth would accelerate over the rest of this year and next would guarantee a hawkish stance on inflation.

The Bank of Korea estimated last month that gross domestic product grew a seasonally adjusted 1.7 percent in the second quarter, the biggest gain since late 2005.

It has forecast that the economy, which derives more than half of annual output from the service sector, would grow 4.5 percent this year and then speed up in 2008, after expanding by 5 percent in 2006.

Manufacturing Fuels Economic Expansion in Q2

Jul 7, 2007 - South Korea’s economy grew sharply in the second quarter, expanding at its fastest rate in a year, fueled by strong output of semiconductors, ships and automobiles, the Bank of Korea said.

Gross domestic product expanded 4.9 percent in the three months ended June 30 from the second quarter last year, the central bank said. That was up from the 4 percent rate in the first quarter and the highest since growth of 5.1 percent in the second quarter last year. Compared with the previous quarter, the economy grew 1.7 percent.

For 2007, the central bank projects GDP growth of 4.5 percent, compared to last year's 5.0 pct.

'The growth figure for the second quarter came at the upper end of our previous forecasts,' said Lee Kwang-June, the head of the economic statistics bureau at the BoK.

He said the fast growth pace over the first half of the year was partly due to the early execution of investment in social infrastructure, as well as strong facility investments.

Although the bank expects a smaller sequential growth rate in the third quarter, the BoK is keeping its view that the country's economic momentum will accelerate into the end of the year and beyond, Lee said.

Analysts believe the strong second quarter number may strengthen the Bank of Korea's case for a further interest rate increase.

At its last policy meeting on July 12, the central bank raised its benchmark call rate target by 25 basis points to a six-year high of 4.75 percent, saying there was a need to mop up excess liquidity which, it feared, could fuel inflation.

There has been conjecture in the markets that another rate increase is in the offing, especially as BoK governor, Lee Seong-Tae, said at the end of the last meeting that interest rates were 'not so high as to dampen economic recovery.'

In response to the latest GDP data the BoK in a written statement said: 'On the production side, the construction sector sagged, while the service sector maintained solid growth and the manufacturing sector reversed its downturn.'

The manufacturing sector expanded 3.6 percent sequentially in the second quarter, after contracting 0.9 percent in the first. The service sector grew 1.1 percent in the second quarter because of strength in the financial intermediation segment.

'On the spending side, construction investment retreated and the pace of private consumption growth eased, while facility investment and merchandise exports continued their solid uptrend,' the central bank said.

Exports grew 5.2 percent sequentially in the second quarter because of robust demand overseas for petrochemical products, industrial machinery and ships. In the first quarter exports grew 2.7 percent quarter-on-quarter.

Private consumption rose 0.8 percent sequentially in the second quarter, after a 1.5 percent rise in the first. The bank blamed lower spending on durable goods such as home appliances for the slower growth.

South Korea's economy grows 4 percent in first quarter on exports, consumer spending

Apr 24, 2007 - South Korea's economy grew 4 percent in the first quarter of 2007 from the same period last year, the Bank of Korea said Wednesday, fueled by strength in exports, capital investment and consumer spending.

For the three months through March, gross domestic product in the world's 10th-largest economy expanded 0.9 percent from the previous quarter, the central bank said in a release.

Exports remained strong, gaining 11.2 percent from the year before, while capital spending by businesses rose 10.3 percent, the bank said. Construction gained 4.3 percent.

Private consumption, which is mostly consumer spending and which makes up more than half the economy, rose 4 percent, boosted by purchases of durable goods such as automobiles.

"Everything looks perfect, except for the high-tech sector," said Oh Suk-tae, economist for Citibank in Seoul. "Consumer spending is quite good."

South Korea's economy grew 5 percent in 2006, accelerating from a recently revised 4.2 percent in 2005, on growth in exports as well as capital and consumer spending.

But the economy slowed in the fourth quarter as companies pared inventories, a trend that carried over into this year.

Goldman Sachs economist Kim Sun-bae said a further drop in inventories knocked more than 1 percentage point off first-quarter growth, but added that the worst is probably over, with the economy poised to build on the strong pickup in consumption.

"We may be seeing the bottoming of the cycle," Kim wrote in a report.

The results largely matched expectations. The average forecast of nine economists surveyed by Dow Jones Newswires predicted growth of 3.9 percent from the year before and 0.9 percent on quarter.

The Bank of Korea does not release an annualized figure for the quarter-on-quarter growth number, a figure that Citibank's Oh calculated to be 3.6 percent.

The central bank, which is independent from the government, is forecasting growth of 4.4 percent for this year, while the Ministry of Finance and Economy is slightly more optimistic, seeing a 4.5 percent expansion.

Hong Sun-young, in charge of macro-economic issues at the private Samsung Economic Research Institute, said that while exports were strong, consumer spending has room to improve.

He said South Koreans remain prone to saving as the society ages and as high levels of spending on education leave little left over for other things.

Hong added that reduced tensions with neighboring North Korea over its nuclear program and the conclusion earlier this month of a free trade agreement between South Korea and the United States are expected to boost consumer confidence.

"I think it will lead to (an) increase in consumer spending in the latter half of the year," he said.