South Korea August exports rebound on extra working days after 19 months of falls
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By Christine Kim and Cynthia Kim
SEOUL (Reuters) - South Korea's exports rebounded in August after falling for 19 straight months, government data showed on Thursday, but analysts stopped short of calling it a firm recovery as the gain was due mainly to two extra working days.
Exports in August rose 2.6 percent on-year to $40.13 billion while imports edged up 0.1 percent to $34.82 billion to result in a trade surplus of $5.30 billion.
This was the first positive growth for exports since December 2015 and for imports since September 2014 and beat poll forecasts for a 0.6 percent rise for exports and a 3.3 percent fall for imports.
In July, exports and imports dropped 10.3 percent and 13.6 percent, respectively.
A majority of South Korea's 13 key export products showed positive growth, including computers, semiconductors and petrochemicals.
"When you exclude the effect of the two working days, trade probably moved at a similar pace as it did in July," said Stephen Lee, senior economist at Samsung Securities in Seoul.
August this year had 24 working days, versus 22 days last year.
"We still have to see whether this gain will be maintained through year-end. Prospects for IT products are positive while global oil prices will have a much smaller effect on trade," Lee added.
The Nikkei/Markit South Korea purchasing managers' index (PMI) showed South Korea's manufacturing activity contracted at its fastest pace in a year in August as production and export orders declined sharply.
A sub-index showed that new export orders declined the most this year amid stubbornly weak global demand, falling to 48.6 in August from 51.4 in July. A reduction in the volume of trade with China, Germany and Iraq contributed to the decline, according to the survey. (A number below 50 shows a contraction.)
The trade ministry said exports to China fell 5.3 percent on-year in August, the slowest decline since Sept. 2015. Further breakdowns will be released later in the day.
Meanwhile, South Korea's annual inflation eased to its lowest for more than a year in August following a temporary cut in electricity tariffs. The finance ministry said inflation was expected to return to previous levels after October.
The consumer price index rose 0.4 percent in August from a year earlier, Statistics Korea said, down from 0.7 percent in July. This was the smallest gain seen since April last year.
The result was well below a median 0.8 percent rise tipped in a Reuters survey.
"If you look at inflation alone, the central bank might look like it has room to cut interest rates, but you have to take other countries' policies into consideration as well as the continued surge in household debt," said Kim Yu-kyum, economist, LIG Investment & Securities.
"Right now export data is more important."
Inflation fell 0.1 percent from July.
South Korea last month took 420 billion Korean won ($377 million) off residential electricity bills for the July to September period due to unusually hot weather.
As a result, annual inflation for electricity, gas and water dropped 12.6 percent in August, compared to a 3.9 percent fall in July.
Core inflation, which strips out volatile food and fuel prices eased to 1.1 percent in August, down from 1.6 percent in July, all compared to a year earlier.
($1 = 1,114.5900 won)
(Reporting by Christine Kim and Cynthia Kim; Additional reporting by Dahee Kim; Editing by Eric Meijer)
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