SEOUL (Reuters) - South Korean exports probably fell in July for the eighth month in a row, but at a slower pace, as a trade rift with Japan dragged on an economy already hurting from weak global demand and the U.S.-China tariff war, a Reuters poll showed.
Exports in July were forecast to contract 11.3% from a year earlier, according to the median estimate of 18 economists surveyed, marginally better than a 13.7% fall in June - the biggest decline in nearly three-and-a-half years.
“It is hard to see (the smaller contraction in July) as a sign of recovery, since it results from one more working day from a year earlier,” said Lee Sang-jae, an economist at Eugene Investment & Securities.
U.S. and Chinese trade negotiators meet in Shanghai this week for their first face-to-face meeting since a G20 truce last month, but expectations are low for a breakthrough.
South Korea’s economy swung back to growth in the second quarter, dodging a technical recession, although the expansion was mostly driven by government spending, suggesting the central bank will cut rates again to stoke demand.
Earlier in July, the Bank of Korea delivered a surprise interest rate cut, while shaving this year’s growth forecast to the lowest in a decade, as a brewing dispute with Japan piled more pressure on the trade-dependent economy.
“We certainly do not rule out another rate cut if economic data continues to deteriorate,” said Defa Zhao, economist at Continuum Economics.
U.S. economic growth slowed less than expected in the second quarter helped by consumer spending, but financial markets expect the Federal Reserve to cut interest rates on Wednesday for the first time in a decade due to rising global uncertainties.
The poll also estimated that South Korea’s imports this month would drop 8.1% from a year earlier, hit by Japan’s export curbs on key chip and display production materials as well as weak domestic demand.
For the first 20 days of July, shipments fell a sharp 13.6% from a year earlier, while imports dropped 10.3% on year with those from Japan falling 14.5%, preliminary data showed.
Separately, 16 economists saw South Korea’s consumer price inflation inching up to a median 0.9% in July in annual terms from 0.7% in June.
Earlier this month, the Bank of Korea trimmed its inflation estimate to 0.7% from 1.1% previously, which was already below its 2% target.
The survey also expects industrial output in June to have contracted by a seasonally adjusted 0.2% from May.
June industrial output data will be released at 8 a.m. on Wednesday local time (2300 GMT on Tuesday).
July trade data is due to be published at 9 a.m. on Thursday (0000 GMT) while July inflation figures are set for release an hour earlier (2300 GMT Wednesday).
Editing by Jacqueline Wong