Business sentiment is softening, particularly for exporters, and the outlook continues to point lower. But the rate of deterioration isn't sharp. Indeed, in today's BOK survey, which includes the outlook into September, business sentiment is unchanged. Taken on its own, sentiment at this level is strong enough to think the BOK should still be hiking.
Importantly, though, inflation indicators in the survey continue to fall. Both input and output price measures in today's survey declined from July; the combination suggests inflation momentum should soften quite materially in the coming months; and that's even before considering trends in China, which indicate more downside for input prices in Korea through year-end.
Overall then, today's survey indicates that at a minimum, the pace of BOK tightening should be slowing. The risk is the BOK survey is heavily weighted towards goods price inflation, and so doesn't capture the services prices that have been driving Korean inflation in recent months.