Q1 GDP Well Above Expectations, Sentiment Points To Further Export Growth

South Korea GDP rose 1.3% q/q in Q1, well above the consensus 0.6% estimate. This was the strongest quarterly growth pace since Q4 2021. Y/Y growth was 3.4%, also well above expectations (2.5% and prior), which is also the firmest pace since end 2021.

• The main swing came from a sharp rebound in construction activity, up 4.8% q/q, versus a 3.8% decline in Q4 last year. Manufacturing activity was +1.2%, services +0.7% in q/q terms, both similar to prior outcomes.

Fig 1: South Korea Q1 GDP Accelerates

Source: MNI - Market News/Bloomberg

• Private consumption rose 0.8% q/q, against a 0.2% rise prior. Exports rose 0.9% in the quarter a slower pace compared to Q4, but imports fell 0.7% q/q, against a 1.4% gain prior, meaning net exports were still positive.
• Earlier data showed manufacturing and non-manufacturing sentiment rising in May. Both measures suggest on-going, albeit moderate growth.
• On the manufacturing side, the trend for export expectations continued to rise, up to 80. The second chart below overlays expectations against actual export y/y growth.
• The data outcomes, particularly a fairly resilient broad based GDP back drop, should reduce pressure at the margin for BoK to ease, at least from a growth standpoint.

Fig 2: Manufacturing Export Expectations Continue To Improve

Source: MNI - Market News/Bloomberg