South Korea Early Exports Hint at Budding Global Recovery

South Korean exports offered an early sign of improvement in global trade after their first year-on-year gain since last summer.

(Bloomberg) — South Korean exports offered an early sign of improvement in global trade after their first year-on-year gain since last summer.

Preliminary trade figures showed a 5.3% gain in exports in the first 20 days of June from a year ago for the first increase since August, a possible sign that a slowdown in world demand is starting to ease. The rise was largely driven by gains in car and shipping-related exports, while semiconductor exports continued to drop.

As a key provider of chips and smartphones for the global economy, South Korea’s export data offer one of the earliest pulse checks on the strength of international trade and tech-sector demand. 

While the figures were encouraging, it’s too early to gauge how fast any recovery might be, according to Krystal Tan, economist at Australia and New Zealand Banking Group. “But it does look like we’re nearing a bottom.”

An improvement in the nation’s shipments can be a leading indicator for the wider trend, though economists warn against drawing concrete conclusions from an incomplete set of monthly figures.

“The data indicates global trade may have bottomed out, but whether it is set for a full-on recovery will be something to be watched,” said Moon Junghiu, economist at KB Kookmin Bank in Seoul. 

Gains were led largely by shipments to the US, steady demand for automobiles and a jump in shipping-related demand. Exports to the EU and Hong Kong also advanced on a year-on-year basis, though shipments to China were down again.

The results fit in with a picture of a US economy showing resilience despite a string of rate hikes while China’s recovery continues to disappoint even as policymakers there ramp up stimulus to try and restore momentum. A full recovery in global trade depends largely on China — a major engine of the world economy — and a resurgence in appetite for chips, which go into everything from cars to electronic devices. 

The figures have to be taken “with a grain of salt and can be seen as US exports stabilizing rather than a surge,” Tan said.

Even with the gain, overall exports are still around 18% lower from their 20-day peak in March 2022. A measure of average daily exports, which removes potential distortions from changes in the number of working days, also showed that shipments weren’t as strong as the headline figure indicated. The average inched down 2%, though that was the smallest fall since exports began to drop last year.

The 20-day data showed exports of automobiles more than doubled. Shipping-related demand, a factor that sometimes skews monthly figures, was also up by more than 100%. 

While semiconductor exports fell 23.5%, the drop eased compared with May’s full month figures. Overall imports declined 11.2%, resulting in a trade deficit of $1.61 billion. 

South Korean President Yoon Suk Yeol has backed initiatives from the Biden administration seeking to reduce reliance reliance on China in global supply chains for crucial materials such as semiconductors.

–With assistance from Jon Herskovitz.

(Updates with economist comments)

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