South Korea’s early exports kept declining in August in the latest sign of lackluster global trade weighing on economic growth.
(Bloomberg) — South Korea’s early exports kept declining in August in the latest sign of lackluster global trade weighing on economic growth.
Daily shipments decreased 10.7% on average in the first 20 days of the month compared with a year earlier, the customs office said Monday. While total exports fell 16.5%, chip sales declined 24.7% and shipments to China dropped 27.5%.
Korean exports have been under pressure since late last year as semiconductor prices slid and demand from China slackened. Korea is one of the world’s largest exporters and the country’s exports serve as a useful indicator of the health of the global economy.
Concerns over trade performance are likely to stay elevated as China struggles to jump start its economy following strict measures to fight coronavirus outbreaks at the expense of consumer activity. China remains the No. 1 buyer of Korean products even though its share is slowly decreasing. It remains to be seen whether China’s decision to ease lockdowns and facilitate travel will aid Korea’s economy.
So far China is steering clear of big stimulus packages to revive its economy even in the face of deflation risks.
What Bloomberg Economics Says…
“The pace of recovery in exports appears slower than expected. The expectation that the spillover effect of China’s reopening from Covid lockdowns would help is becoming weaker, due to China’s sputtering recovery and its property-sector uncertainty. These factors will pose a headwind to Korea’s growth outlook.”
— Hyosung Kwon, economist
The latest Korean trade results come just days before the Bank of Korea releases a formal assessment of the economy and its growth outlook. Economists widely believe the central bank will hold its rate at 3.5% on Thursday as it puts increasing emphasis on safeguarding economic momentum amid an exports gloom.
Exports to the US fell 7.2% while those to the European Union dropped 7.1%, indicating the slump in sales goes beyond China. Still, some sectors showed signs of optimism, with cars selling 20.2% more than a year before. Exports of ships also jumped 54.9%.
Imports fell 27.9%, with the trade balance recording a shortfall of $3.6 billion for the first 20 days of August, according to the customs office.
(Adds economist comment and more details)
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