South Korea’s exports are expected to climb back into double digits in June as the global economy shakes off the effects of the pandemic, although a slower pace in recent months suggests the days of oversized profits may be over.
Exports increased by 29.5% in the first 20 days of the month compared to the previous year, the customs office announced on Monday. Adjusted for calendar changes, the average daily shipments increased by 33.7% in the reporting period, which was half a business day less than in the previous year.
With vaccinations accelerating and bans easing around the world, demand in South Korea has increased overseas, from memory chips to cars, smartphones and other consumer goods. The gains were less than the 45.6% increase for the entire month of May, mainly due to a less favorable base effect, while exports may pick up in the remaining days of the month.
South Korea’s trade numbers provide a timely assessment of the health of global trade as its manufacturers are positioned well across supply chains. Sales to the US, Europe and Japan saw strong gains, but slower growth in China suggests that export profits to other economies could also weaken as the recovery there enters a more mature post-pandemic period.
Consumers in major economies could also redirect spending from goods to services as virus restrictions ease. Still, most economists agree that the export outlook for Korea remains positive.
“It’s time export momentum slowed due to base effects,” said Yoon Yeo-sam, an analyst at Meritz Securities in Seoul. “But they will remain largely cheap enough not to disrupt the course of economic growth while the Bank of Korea can continue to shift its focus to financial stability.”
Early June trade data suggests that exports will remain the driving force behind South Korea’s recovery and should bolster views that the BOK is preparing for an earlier rate hike than most developed countries. In a report last week, the BOK said US tax incentives, rising global ship sales and pent-up demand from overseas consumers will boost exports for the remainder of the year.
Exports to China, South Korea’s largest overseas market, rose 7.9% year over year between June 1 and June 20. Overall, semiconductor deliveries rose by 28.5%.
Exports to the US increased 41.3%, while shipments to the European Union increased 48.8% and those to Japan increased 33%.
Auto deliveries rose 62.2% while oil products rose 58.6%. Wireless communication device sales grew 15.8%. Ship exports fell by 27.7%.
South Korea’s total imports rose 29.1% in the first 20 days of June.
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