South Korean economic growth likely decelerated in Q4 on weakness in construction and consumption

The South Korean economic growth is expected to have decelerated in the fourth quarter because of construction and consumption. According to a Societe Generale research report, South Korea’s GDP growth is expected to have decelerated to 0.3 percent in the December quarter from 0.6 percent growth seen in the prior quarter. This would be a deceleration in the economic growth of two straight quarters.

According to an analysis of the Bank of Korea’s 2016 GDP estimates included in its recent macroeconomic outlook, the deceleration in the fourth quarter economy is expected to be mainly due to construction and consumption. Private consumption growth is expected to have dropped to 0.2 percent sequentially in the fourth quarter from 0.5 percent, possibly because of political uncertainties and subdued consumer sentiment.

Construction investment is likely to have contracted 2 percent sequentially after growing 3.5 percent in the prior quarter. This mainly shows the seasonal pattern that is not totally erased by the seasonal adjustment process, noted Societe Generale. There might be encouraging news in facility investment, which is expected to have grown sharply by 6 percent following the recent sluggish performance.

But the deceleration in merchandise exports growth to 0.2 percent from 0.7 percent would be disappointing given the recent signs of export rebound in trade data.

“As usual, financial markets are unlikely to be affected much by this data release: the slowdown in 4Q16 GDP was already reflected in the BoK’s downward revision of its 2017 GDP forecast from 2.8% to 2.5%”, added Societe Generale.