South Korea’s exports extended gains in July, suggesting ongoing resilience in a global economy that’s under pressure from elevated energy prices, rising interest rates and China’s virus restrictions.
Overseas shipments climbed 9.4% from a year earlier, just shy of a forecast 10% gain, government data showed Monday. Average daily shipments, which take into account one less business day than a year earlier, rose 14.1%, it said.
The data showed semiconductor shipments -- Korea’s largest single source of income -- edged up just 2.1%, while exports to China slid 2.5%. By contrast, sales to the US surged 14.6% to breach $10 billion for the first time ever.
That may signal a reorientation in international supply chains as China maintains its strict Covid Zero policy and the US tries to draw its allies closer to ensure the security of components and production.
“A lot of what has been going to the US via China is now directly going to the US,” said Cho Chuel, an analyst at the Korea Institute for Industrial Economics & Trade. “Covid lockdowns have eroded China’s role as a manufacturing hub this year while investment in the US is drawing exports.”
South Korea’s trade data are an early indicator of global economic activity as its manufacturers are positioned widely across supply chains. Concerns about the global outlook have increasingly weighed on Korean exporters including Samsung Electronics Co., the world’s largest memory-chip producer.
Covid lockdowns in China have increased disruptions to global supply, while Russia’s war on Ukraine has amplified the already high price of energy that Korean exporters rely on to manufacture goods.
A steady trade performance has given the Bank of Korea confidence to keep tightening monetary policy to cool inflationary pressures and shore up the won. The central bank will hold a policy meeting later this month after raising the benchmark interest rate by a half-percentage-point in July.
Separately, South Korea’s July manufacturing purchasing managers’ index fell to 49.8 in July, the weakest reading since September 2020, according to S&P Global. A result above 50 signals an expansion while anything less than 50 means a contraction.
Today’s report from the trade ministry also showed:
- Oil products jumped 86.5% and automobile shipments advanced 25.3% in July from a year earlier.
- Sales of ships rose 29.2% and exports of rechargeable batteries increased 11.8%.
- Crude prices climbed 41.4% and gas prices jumped 113.9% from a year earlier, contributing heavily to the trade deficit
- Exports to the US have grown for almost two years in a row while shipments to the Association of Southeast Asian Nations and India have increased for 17 months in a row.
