South Korea's industrial production is likely to have extended its recovery momentum in July after the sizeable turnaround in June. July trade data suggests that non-electronics sectors such as chemical and metal products outperformed the electronics sector.



Moreover, industry data shows that auto production increased for the second consecutive month in July based on the seasonally-adjusted series. Year-on-year growth probably declined from 1.2% in June to -2.5% in July despite positive mom growth, partially because of negative base effects (mom growth in July 2014 was 1.6%), says Societe Generale.



Sustained recovery in industrial production would be good news for near-term growth momentum. Whereas, Societe Generale suggests a positive sign in July industrial production should be taken with a grain of salt, due to following reasons.

Firstly, the relationship between GDP and industrial production has not been restored yet. In Q2 2015, manufacturing production in GDP rose by 0.8% qoq, while industrial production fell by 1.0% qoq.

Secondly, a renewed slump is expected in exports in August.