A private-sector survey also found new orders for South Korean exporters declined last month, suggesting that domestic consumption would have to substantially improve to offset some of the external headwinds. "Today's trade data should reinforce the government's cautious view on growth," said Raymond Yeung, senior economist at ANZ bank, adding that another rate cut by the Bank of Korea before the year is out remains a distinct possibility. South Korean exports fell 0.1 percent on-year to $46.3 billion in August while imports rose 3.1 percent to $42.9 billion, the trade ministry data showed. This resulted in a higher trade surplus of $3.4 billion in August than a $2.4 billion surplus in July. It was the first annual fall in exports since May. Median forecasts from a Reuters survey were for August exports to edge up 0.2 percent from a year earlier and imports to rise 5.1 percent, although individual forecasts varied widely. The trade ministry blamed partial strikes at automakers and fewer working days this year than last year for the weak exports, but analysts said the uneven global recovery is set to weigh on South Korea's trade-reliant economy for a while. "Exports are still facing downward pressure by the slowing economies in major export destinations such as Europe and China, and so markets will need to err on the side of caution," said Park Hee-chan, an economist at Mirae Asset Securities. Exports to China fell in August for a fourth consecutive month on-year, the longest losing streak in two years, taking some of the shine off a continued recovery in shipments to the United States and the European Union. Underlining the uncertain outlook for South Korean exports, China's official Purchasing Managers' Index (PMI) slipped in August and a private-sector survey showed decline in new orders for South Korean in August. South Korean trade data is closely watched by international markets as the country is the world's seventh-largest exporter and the first major exporting economy to release the report each month, providing an early gauge on the health of global demand. Bok Eyed as Government Cautious on Ooutlook The economy grew a seasonally adjusted 0.6 percent in the second quarter from the previous three-month period, the central bank estimated in July, the weakest in more than a year and slower than a 0.9 percent rise in the first quarter. The Bank of Korea, the country's central bank, cut the policy interest rate last month for the first time in 15 months by 25 basis points to 2.25 percent to join the government's drive to stimulate domestic demand. The rate cut was widely seen to have been made under government pressure. Finance minister Choi Kyung-hwan, who is spearheading an $11 billion stimulus drive and other measures, has repeatedly warned about the growing risks to the economy. "Headline statements of such (by Choi) have become a yardstick to predict the BOK's future course of action," ANZ's Yeung said. A recent string of data has shown signs of improvement in domestic demand after a weak performance in the second quarter, but some analysts and government officials remain cautious due to a halting global recovery. A trade ministry official said in a briefing following the data release on Monday that September's exports will likely show better performance compared to August, but they hinged on recovery in advanced economies. South Korea's economy relies heavily on exports as the performance at big exporting industries has a strong influence on employment and investment within the country, which in turn filters through to consumer spending. China is the largest export market for South Korea, taking around one-quarter of the smaller neighbour's total shipments. The United States and the European Union are the next major destinations for South Korean exports. For the whole of the year, the central bank expects economic growth to quicken to 3.8 percent from 3.0 percent last year, but the government is concerned about heightened downward risks stemming from a shaky global economy.