South Korea Q3 GDP slows slightly, but better than forecast

The seasonally adjusted reading, down from a 0.8 percent gain in the second quarter, compared with a median 0.6 percent rise tipped in a Reuters survey.

It also showed that facility investments fell 0.1 percent on-quarter in the July-September period, compared with a 2.8 percent on-quarter expansion three months earlier. On a sequential basis, the real GDP expanded 0.7 percent, slightly slower than the 0.8 percent growth recorded in the prior quarter.

Despite the beat on both quarterly and year-on-year GDP, the Bank of Korea suggests growth could have been even better, citing troubles atelectronics giant Samsung following the release, then recall, of the Galaxy Note 7, along with industrial action at Hyundai.

Services rose 1.0 percent in the September quarter from the previous three-month period, also better than a 0.6 percent gain in the second quarter, most likely thanks to government efforts to launch nationwide retail sale events to pry open wallets. On the other hand, exports grew 0.8 percent with rises in exports of chemical products and semiconductors. Capital investment slipped 0.1 percent, down from 2.8 percent growth in the previous quarter.

Government consumption grew by 1.4%, in part due to an increase in health insurance benefits.

It left the year-on-year expansion at 2.7%, down on the 3.3% rate reported in the previous quarter.

A BOK official remained hopeful about Korea’s outlook, saying it could achieve 2.7 percent annual growth this year, as long as the economy does not contract any further.

Both Chung and the ministry official agreed that fourth quarter growth would also be affected by Samsung’s decision to discontinue production of its fire-prone Galaxy Note 7 smartphone, although the economic impact from lost manufacturing was almost all reflected in the third quarter.

Construction rose 4.4 percent sequentially, driven by a growth in building construction. LGERI projects 2.2 percent growth next year.

“With China and European Union also likely to slow, Korea faces hard external conditions”, he said.