South Korea: "Deflation Now a Worry"

As 2019 kicked off, Reuters reported that none of the 10 economists in its survey had predicted a fall in South Korean exports in December 2018, yet that is what happened.

The January 2019 Elliott Wave Financial Forecast noted:

South Korea is the world's leading exporter of computer chips, ships, cars and petroleum products. In December, its exports to China fell 13.9%, contributing greatly to a "surprise" decline of 1.2% in global exports.

And, now, Asia's fourth-largest economy is confronting the prospects for deflation, according to an April 3 Korea JoongAng Daily article titled, "Inflation hits 2-plus-year low, deflation now a worry." Here's an excerpt:

Prices are rising at their slowest pace in two and a half years, with concern now building that the economy may be heading toward deflation.

According to Statistics Korea on April 3, consumer prices in March increased 0.4 percent year on year. That is lower than the 0.5 percent rise in February and the third consecutive month below 1 percent.

Inflation in March was at its lowest level since July 2016, when consumer prices rose 0.4 percent. Core inflation, which excludes food and beverage and petroleum prices, hit 0.8 percent, its lowest level since February 2000.

The price weakness comes as facility investment shrinks, consumption drops and unemployment rises. Weakness in the real estate market has also weighed on inflation following efforts by the Moon Jae-in administration to cool the property market.

"The biggest reasons for the slow growth are the prices of petroleum and vegetables," said Kim Yun-sung, director of price statistics at Statistics Korea. "Additionally, there was slow price growth in the service sector."...

Low inflation in recent months has been deepening concern that Korea is now entering a long-term slowdown similar to what Japan experienced starting in the early 1990s, when its asset bubble burst. Comparisons to Japan's lost decade are being made.

You can read the entire article by following the link below: