South Korea’s early trade data indicate exports are set to post strong gains in April as powerful U.S. demand shores up global commerce in the face of a Covid-induced slowdown in China.
Exports advanced 16.9% in the first 20 days of the month from a year earlier, led by semiconductors, the customs office reported Thursday. Exports to China, the biggest buyer of Korean goods, rose just 1.8% while shipments to the U.S. surged 29.1%.
South Korea releases trade data earlier than most countries and its 20-day performance is closely watched as an indicator of global demand due to Korean companies’ deep integration into the world’s supply chains. That was reflected in the diverging results for the world’s two largest economies that are also South Korea’s top two overseas markets.
The International Monetary Fund’s Anne-Marie Gulde highlighted this in an interview with Bloomberg Television just prior to the release of the data, noting a forecast downgrade for China’s growth will impact surrounding economies.
“The most important channel is the trade channel,” said Gulde, Asia and Pacific deputy director at the IMF. “Half of growth in Asia is now within Asia. So to the extent that demand for imports in China goes down, that definitely has a negative effect on all of those countries that export to China.”
Overseas shipments are a major component of South Korea’s economy, which is expected to miss growth estimates this year as inflationary pressures overshadow consumption worldwide. Russia’s war on Ukraine is compounding difficulties by driving up commodity prices.
The data today indicate overall exports remain robust, as the Bank of Korea had predicted earlier in the year. Economists say the central bank is likely to stick to a path of policy normalization with new Governor Rhee Chang-yong seeking to lift the benchmark rate further unless he sees risks to the economy.
Thursday’s report showed the trade deficit from April 1-20 swelled to $5.2 billion as imports surged 25.5%.
Semiconductor shipments increased 22.9%, according to the data. Exports of cars edged down 1%, while oil products jumped 82%. Sales of wireless communication devices fell 10.7%.
Exports to the European Union climbed 12.3% and those to Japan increased 9.6%.