Korea Exports See Record Start to Year as PMI Hits Decade-High

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South Korea’s exports posted its best January on record while manufacturing activity reached the strongest level in a decade, adding to optimism that global commerce is on track for a recovery after a year battered by the pandemic.

Overseas shipments increased 11% from a year earlier, the trade ministry said Monday, beating economists’ forecasts for a 9.8% increase. Daily export value was $2.1 billion, the highest for a January. Imports rose 3.1%, the fastest pace in two years.

A separate report from IHS Markit showed a purchasing managers’ index for Korean manufacturing climbed to 53.2, the highest since 2011. That marked the fourth straight month the gauge exceeded the 50-threshold that signals expansion.

Korea Exports See Record Start to Year as PMI Hits Decade-High

The better-than-expected export performance supports the view that Korea’s economy could reach pre-pandemic levels of output in the first half of the year. With the country’s trade data seen as a key indicator of global demand, it also suggests overseas activity is holding up despite the pandemic still raging in many parts of the world.

Korea’s shipments to China, the U.S., and the European Union all rose by double digits, while total semiconductor shipments increased 22%.

Key Insights

  • Exports helped the Korean economy post a smaller-than-expected contraction last year. They are expected to remain the key driver this year with persistent coronavirus outbreaks at home likely to keep consumer activity depressed for some time.
  • The government expects exports to rise 8.6% in 2021, buoyed by tech demand and a revival of broader consumer appetite as vaccination spreads.
  • “Some pent-up demand along with revived economic momentum is being reflected,” said An Young-jin, an economist at SK Securities. “The biggest driver is the semiconductors and how some of Korea’s main exports do will be a key measure of global demand as the momentum spreads to different sectors.”
  • Korea’s export outlook depends much on the semiconductor sector. SK Hynix Inc., the world’s second-largest chipmaker after Samsung Electronics Co., expects prices for memory to rise this quarter, which adds to the view that exports will continue to improve. Samsung, on the other hand, said last month it was expecting weaker profitability in the first quarter.
  • Also crucial to the outlook is the auto industry. Automotive companies such as Hyundai Motor Co. stand to gain as the world accelerates its shift to next-generation vehicles powered by electricity or hydrogen. There is a still a shortage of chips used in vehicles amid increasing global demand, according to research firm TrendForce.

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  • The monthly trade data also got boost because there was an extra business day this January compared with 2020. Measured by the daily average, exports rose at 6.4%.
  • Total automobile shipments increased 40% in January from a year earlier, while exports of wireless communication devices rose 58%.
  • Overall exports to China rose 22%, while those to the U.S. jumped 46% to reach a monthly record in value. Shipments to the European Union increased 24%.
  • Trade surplus was $3.96 billion.

©2021 Bloomberg L.P.

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