Korea’s Export Slump Eases in Hopeful Sign for Global Trade

South Korea’s exports fell less than expected in August, raising hopes that a nascent recovery in global trade may continue.

(Bloomberg) — South Korea’s exports fell less than expected in August, raising hopes that a nascent recovery in global trade may continue.

Exports fell 8.4% from a year earlier, according to data released Friday by the trade ministry. That compared with economists’ forecasts for an 11.8% drop and represented a slower pace of decline than in July. Overall imports fell 22.8%, resulting in a trade surplus of $870 million.

Policymakers are hoping exports will help Korea’s economy grow this year in line with current forecasts after authorities repeatedly trimmed estimates in recent months in light of disappointing data. The figures will be parsed by other trade-reliant nations that see Korea as a barometer for international commerce.

The World Trade Organization said last week that merchandise trade volume turned higher in the second quarter after two periods of decline, but remains below trend. 

Deteriorating economic conditions in China, the world’s second-biggest economy, will continue to be a point of concern. Slack demand in China is one factor behind a slump in global semiconductor prices that has cut into earnings at major Korean exporters such as Samsung Electronics Co.

Korea is seen as a bellwether for global trade because it exports goods that make their way into a wide variety of products, including machines, displays and refined oil. Global activity has been restrained by rising interest rates and China’s struggle to rebound from Covid lockdowns.

Global central banks are likely to continue their fight against inflation for some time to come, putting pressure on demand with restrictive monetary policies. The Bank of Korea has held policy steady in recent months while keeping the door open to potential further tightening after raising its benchmark rate by 300 basis points since 2021.

Policymakers expect Korea’s economy to grow 1.4% this year as they maintain their optimism that trade will improve toward the end of the year. President Yoon Suk Yeol in July highlighted exports as a key generator of jobs for the country and called for government support for exporters.

Korea’s exports are driven largely by the country’s ability to export technology products, an area where competition with China is growing. The growth in Korea’s semiconductor inventories eased in July for a second month, signaling a slow pick-up in global demand for memory chips.

Korean exports of chips slumped 21% in August while shipments of oil products were down 35%. Overseas deliveries of automobiles increased 29%.

Shipments to China dropped 20% from a year earlier, while exports to the US edged up 2%.

(Updates with more details and a chart)

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