Korea Early Exports Show Resilience in Face of China Slowdown
(Bloomberg) -- Strong gains in South Korea’s exports this month suggest global demand is holding up despite headwinds from supply chain snags and an energy crunch disrupting Chinese production.
Overall shipments grew 36.1% in the first twenty days of the month from a year earlier, data from the customs office showed Thursday. Sales to China jumped 30.9%, indicating that Korea’s biggest trade partner still has solid demand for parts and components.
The report suggests the recovery in global commerce has yet to be derailed even as extended lead times and surging energy prices pose challenges to manufacturers. Daily average exports, a reading that removes calendar distortions, rose 25.7% during the period, which had one more business day compared with a year earlier.
Still, a slowdown that looks set to deepen in China clouds the outlook and could mean weaker orders from consumers and businesses in the world’s second-largest economy. Economists have been lowering forecasts for China’s growth for this year, expecting the power crunch to persist into the final quarter.
The Bank of Korea will be closely monitoring the trade figures as it decides whether to push ahead with a November rate hike it’s signaled.
What Bloomberg Economics Says...
Slower growth in China, supply chain disruptions and moderating global demand may bring double digit gains back to earth in the months ahead, but we expect the export sector -- and especially the electronics sector -- to remain a key source of support for the economy’s recovery into 2022
--Justin Jimenez, economist
For the full report, click here.
With Korean manufacturers benefiting from heightened global demand for tech during the pandemic, the central bank expects exports to be the main driver behind a 4% expansion of the economy this year.
Korea’s strong trade performance has allowed the BOK to shift its focus to managing financial risks, initiating a rate-hike cycle in August.
Thursday’s report showed demand in major markets outside China also remained strong through the first 20 days of the month. Shipments the U.S. were up 37.1%, while exports to Japan rose 51.9%.
Overall semiconductor shipments rose 23.9%. Shipments of gasoline-related products more than doubled, while cars gained 10.5%. Wireless communication devices rose 2.6%.
Total imports during the first twenty days of the month surged 48% from a year earlier, indicated strong domestic demand.
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