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S.Korea Aug exports growth seen slowing, inflation to cool slightly

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SEOUL — South Korea’s exports growth likely slowed in August, a Reuters poll showed on Tuesday, partly hurt by COVID lockdowns in major trading partner China, while consumer inflation is expected to have cooled for the first time in more than half a year.

Outbound shipments in August were projected to grow 5.5% year-on-year, according to the median forecast of 23 economists, following a 9.2% gain in July.

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That would extend their annual gains to a 22nd consecutive month, but mark the third slowest growth rate over this period.

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Economists pointed to weaker demand from China, its largest trading partner, amid fallout from COVID-19 lockdown measures, and a decline in semiconductor prices for the moderating export momentum.

South Korea’s exports for the first 20 days of this month grew 3.9% from the same period a year before, but sales to China dropped 11.2%, while shipments of its biggest-selling semiconductors fell 7.5%.

“Slowdown of export momentum seems to be in full swing now,” said Park Sang-hyun, chief economist at Hi Investment and Securities. “Global economic slowdown, especially in China and Hong Kong, is expected to result in a slower export growth.”

Imports were expected to grow at a much faster pace of 22.9%, accelerating from a 21.8% rise in the previous month, bringing the trade balance to a deficit for a fifth consecutive month and to a record monthly amount.

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Full monthly trade data will be available on Sept. 1.

The poll also forecast the consumer price index to have risen 6.1% on-year in August, slowing slightly after accelerating for six straight months to 6.3% in July, the fastest pace since November 1998.

Among 24 economists, 75% expected the inflation rate to slow for the first time since January, while four expected a flat rate and two expected it to accelerate even further.

“This would mean an earlier-than-anticipated peaking of headline inflation, which may become a ‘trigger’ for the termination of the Bank of Korea’s rate-hike cycle,” said Oh Suk-tae, economist at Societe Generale.

“However, policymakers are likely to consider a number of other factors such as the chances of a rebound in energy inflation, the still-elevated level of core inflation and the widening policy rate differential between Korea and the U.S.”

Factory output was forecast to post a seasonally adjusted 0.1% decline in July from the previous month, following two months of gains. (Reporting by Jihoon Lee in Seoul and Devayani Sathyan in Bengaluru; Editing by Shri Navaratnam)

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