Korea Economy, Construction & Lumber Shipments
The South Korean economy continued to grow at the fastest pace in more than two years in the third quarter of 2013 on improving domestic demand and a pickup in facility investment. South Korea’s GDP grew 1.1% in the third quarter from the previous quarter. From a year earlier, the economy grew 3.4% in the third quarter, the fastest on-year growth in seven quarters, after gaining 2.3% on-year in the second quarter.
Domestic demand led the economic growth in the third quarter as exports declined from three months ago, mainly due to seasonal factors. South Korea’s Exports declined 0.9% on-quarter in the third quarter after growing 1.8% on-quarter in the previous quarter. Private spending rose 1.1% on-quarter after gaining 0.7% in the second quarter. Facility investment rose 1.2% in the third quarter, compared with a 0.2% on-quarter decline in the previous quarter and construction investment advanced 2.7%, compared with a 3.4% on-quarter expansion three months earlier.
South Korea’s consumer prices increased 0.8% in September. Jobless rate fell to 2.7% in September, down from 3% in August and job creation accelerated, raising hopes that labor market conditions are improving. The Korean won is expected to strengthen against major currencies as foreign investors reallocate their funds from emerging markets with weak fundamentals such as Indonesia to economies with stable outlooks such as Korea. The won-dollar exchange rate rose 5.2 won to 1,061 won on October 24, 2013 as foreign exchange officials from the Bank of Korea and the Ministry of Strategy and Finance jointly intervened for the first time this year in a bid to offset a stronger won.
Analysts and industry sources said that the Korean won has the potential to gain further to approximately 1,000 won, as the currency is still undervalued given Korea’s sound fundamentals backed by a current account surplus. The Canadian dollar closed at 1,016.19 won on October 29, 2013, decreased 7.33 % from 1,096.60 the same time in 2012 and down 2.42 % from 1,035.86 one month earlier.
Housing Construction Update:
Korea’s housing starts in the first eight months of 2013 decreased 7.6% to 56,568 buildings from a year earlier 61,213 buildings. The number of wood building permits and wood building starts for the first eight months in 2013 also decreased 4.4% to 7,847 and 4.8% to 6,847, respectively, compared with the same period in 2012.
Source: Ministry of Land, Infrastructure and Transport (as a percent compared to previous year same month and period)
Lumber Shipments Update:
BC softwood lumber export volume to South Korea for the first eight months of 2013 significantly decreased 25% to 179,051 cubic meters as compared to 240,227 cubic meters over the same period in 2012 widely affected by overall domestic housing market slump and treated wood issue in Korea and losing price competiveness due to increased Canadian lumber prices. However, increased Canadian lumber prices and stronger Korean won compensated the decreased export volume gap showing a mere 4.4% decrease in export value to CAD$45.131 million as compared to CAD$47.219 million over the same period in 2012.
The high production rates at the sawmills in Western Canada and Western US plus the large volumes of logs that were leaving the west coast for China, Japan and South Korea have caused an upward price pressure on sawn logs in the region for the past few years, with prices almost doubling since 2009.
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