The Bank of Korea is set to press ahead with another aggressive pause, concerned about the recent reacceleration of inflation and faster-than-expected household debt growth. A key area to watch will be evidence of minority views among board members on the prospects for rate cuts in the near future after data suggested sluggish consumption and investment.
In the rest of Korea, we believe consumer confidence should continue to deteriorate with higher borrowing costs and poor performance in asset markets (property, KOSPI, KRW). On the other hand, business confidence is expected to improve thanks to better prospects for the IT and chip markets. We believe this optimistic assessment will be confirmed by a recovery in exports, which are expected to rise for a second month mainly due to the recovery in chips and automobiles.
Turning to monthly activity data, October industrial production is expected to increase based on strong export results from the previous month. However, retail sales and investment driven by domestic demand are likely to decline.