Korea’s Exports Rise Most Since 2018 Amid Global Recovery

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South Korea’s exports rose the most in more than two years amid continued robust gains in manufacturing activity, signaling strength in global demand and improved confidence over the outlook as more countries start vaccination programs.

Overseas shipments increased 16.6% from a year earlier in March, the trade ministry said Thursday, matching economists’ forecasts. Korea’s exports to the U.S. and the European Union gained strongly with values reaching some of the highest levels on record. Sales to China also racked up further solid increases.

A separate report from IHS Markit showed a purchasing managers’ index for Korean manufacturing held at 55.3, unchanged from February, which was its strongest reading since 2010.

Korea’s Exports Rise Most Since 2018 Amid Global Recovery

The improving trade momentum offers further evidence that the global recovery is on track, underpinning a rebound in Korea’s export-reliant economy. The country has seen a wave of growth forecast upgrades in recent weeks, spurred by its export performance and signs of a consumption pickup.

Chips and automobiles have been leading the export rally as overseas consumer demand returns and investment improves. Still, surging coronavirus infections in some parts of the world are headwinds to trade, with countries like France imposing stronger restrictions to rein in the spread.

Key Insight

  • Exports are key to Korea’s economy achieving President Moon Jae-in’s vision of a “faster and stronger” recovery than initially expected this year. Rising external demand is fueling investment by local firms, while also buoying sentiment among consumers and businesses.
  • Worsening chip shortages help boost prices for Korean semiconductors, but the country’s automakers are taking a hit like many of their peers across the world. The government has expedited the imports of automobile chips, while working with local chipmakers to explore ways to improve supplies.
  • A brighter outlook for the U.S. bodes well for Korean exports. The massive U.S. fiscal stimulus, along with a jump in confidence among Americans, is expected to further fuel consumer demand for products from Asia, including Korea.
  • “What will matter to markets is the second quarter, because what we have so far is largely in line with expectations,” said Park Jeong-woo, an economist at Nomura Holdings Inc. Exports need to rise more than 45% on average in the second quarter to be able to say the economy is clearly rebounding, given the plunge a year earlier, he said. Shipments fell by more than 20% in April and May 2020.
  • The trade ministry said export performance last month was robust even without the base effect, with total export value at $53.8 billion reaching the highest for the month of March.

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  • Exports to China jumped 26%, while those to the U.S. rose 9.2%. Shipments to EU surged 36.6%.
  • Overall shipments of semiconductors rose 8.6%, while automobiles gained 15.3%. Steel products rose 12.8% and petrochemicals surged 48.5%. Park from Nomura said the jump in steel and oil products reflects the recent rise in the prices of commodities and energy.
  • Overall imports rose 18.8% from a year earlier, leaving a trade surplus of $4.17 billion.

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