South Korea’s Export Slump Extends to Ninth Month Amid Gloom

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South Korea’s exports extended their slump in August as an escalating feud with Japan adds to uncertainties for the economy already elevated amid the U.S.-China trade war.

Exports fell 13.6% in August from a year earlier, a ninth consecutive month of contraction, data from the trade ministry showed Sunday. That compared with economists’ consensus for a 12.5% drop. Imports fell 4.2%, and the trade surplus was $1.7 billion.

Export weakness has been the main drag on South Korea’s economy this year, weighing on companies’ investment and hiring. Headwinds from trade tensions remain high. Japan, a key supplier of materials and components, formally removed South Korea from its list of trusted trading partners on Aug. 28. The U.S. will start applying a new round of tariffs on some Chinese imports starting Sunday.

Key Insights

• Exports fell in August due to deteriorating external trade conditions, base effect and a drop in operating days, according to a trade ministry statement.
• Impact from Japan trade sanctions seen limited so far, statement said.
• South Korea’s trade data serve as a barometer of global demand due to its early release. The country is the world’s biggest source of memory chips, which go into everything from computers to smartphones.
• “Global trade remains in a slump, and a turnaround is not around the corner,” said Howie Lee, an economist at Oversea-Chinese Banking Corp, before the data release. “There are some suggestions that the electronics market may have hit a bottom, and it will be interesting to see if this manifests.”
• The Bank of Korea held its benchmark interest rate on Friday, while noting that risks to its 2.2% growth forecast have increased.

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• Trade surplus for August was $1.7 billion.
• Shipments to China dropped 21.3%, a reflection of slowing growth in the world’s second-largest economy and South Korea’s biggest export destination.
• Semiconductor exports fell 30.7% by value, while volume was up 4.5%.
• Imports from Japan declined 8.2%; Exports from Japan dropped 6.2%.
• Exports to the U.S. fell 6.7%.
• Automobile shipments increased 4.6%, while displays declined 23.5%.
• Petrochemicals shipments fell 19.2% and oil products slid 14.1%.
• NOTE: All figures are for August and changes are year on year.

To contact the reporters on this story: Sam Kim in Seoul at skim609@bloomberg.net;Hooyeon Kim in Seoul at hkim592@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jiyeun Lee, Paul Jackson

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