Letter of credit (L/C) arrivals in the manufacturing sector are one of several positive indicators suggesting signs of increased economic activity in South Korea.

According to figures released in November by The Conference Board - the widely recognised US-based index compiler - six of the seven components in Korea's Leading Index increased by 0.9 per cent in August. An increase in L/C arrivals made the most positive contribution of all indicators in the index.

Turnaround

Other positive movements were recorded in inverted yield of government public bonds, inverted index of inventories to shipments for manufacturing, stock prices, value of machinery orders in manufacturing, and monthly hours worked. The only negative indicator was falling real exports.

August was the first month in which Korea's Leading Index showed an increase since February 2001. The Conference Board also noted that improvements elsewhere in the economy could be attributed to rising industrial productivity and sales.

Lower oil prices

The indicators relate to economic activity before the September 11 terrorist attacks and the US-led coalition's military action in Afghanistan. The negative impact of these events on South Korea may however be offset to an extent by decreased international oil prices which according to the Bank of Korea are expected to add some US$1.4 dollars to South Korea's trade surplus.

South Korea imports some 900 million barrels of crude oil every year. International oil prices have been declining post-September 11 as demand has fallen due to global business slowdown and cutback on aircraft operations.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.