S. Korea posts rare trade deficit, inflation eases

South Korea posted its first trade deficit in two years in January as falling overseas demand hit exports but inflation eased, official figures showed Wednesday. The Ministry of Knowledge Economy said exports last month fell 6.6 percent from a year earlier to $41.54 billion. Imports rose 3.6 percent to $43.49 billion from January 2011, leaving a deficit of $1.96 billion compared to a surplus of $2.9 billion a year before. January marked the first time in 27 months that monthly exports had shrunk year-on-year, with the ministry attributing the drop to the global economic downturn and seasonal factors. "There is a tendency for worsening exports every January due to a cut in shipments following large year-end sales," it said, adding the deficit rose further because of a significant increase in prices of imported oil. Exports to European Union members fell 44.8 percent year-on-year in the first 20 days of last month. But overseas shipments to Southeast Asian nations rose 22.3 percent, and exports to Japan increased 37.2 percent. Exports to the United States rose 23.3 percent year-on-year and to China by 7.3 percent. Economists said the latest trade data does not necessarily indicate a trend. January is a seasonally bad month for exporters and the Lunar New Year holiday also reduced the number of working days. The government said it expects South Korea's trade balance and exports to rebound in February. "It's hard to say that exports are on a downward trend on this data alone," said Hyundai Securities economist Lee Sang-Jae. "External conditions like the US economy appear to be stabilising, and I think a trade surplus for the year is still very likely after some weakness early on." Separate figures from Statistics Korea showed that inflation slowed in January as the government prioritised its battle against rising prices. The consumer price index rose 3.4 percent in January from a year earlier, slowing from a 4.2 percent increase in December. The index gained 0.5 percent month-on-month. Core inflation, which excludes volatile oil and food costs, rose 3.2 percent in January from a year earlier, less than the 3.6 percent the previous month.