South Korea’s exports grew at a faster-than-expected pace in May, suggesting global demand remains resilient in the face of war in Ukraine and a slowing economy in China.

Overseas shipments advanced 21.3% in May from a year ago, helped by strengthening car exports, trade ministry data showed Wednesday, exceeding economists’ forecasts for an 18.4% gain. Exports to China rose 1.2% in May after dropping a month earlier. Total semiconductor shipments increased 15%. 

While the monthly figure was stronger than forecast, the gains were inflated by two extra working days in the month compared with a year earlier. Average daily shipments rose 10.7%, for the smallest increase since January 2021, continuing a trend of stabilization in double-digit year-over-year gains.  

Still, the result shows global trade is holding up better than expected as the pandemic recovery continues, despite the impact of Russia’s war in Ukraine, surging commodity prices and supply snarls exacerbated by China’s lockdowns.

“The export growth is impressive given the slowdown in its largest market China and a high base of comparison,” said Ho Woei Chen, economist at United Overseas Bank Ltd. in Singapore. “External demand looks to be supported especially as China’s Covid situation eases.” 

The risks of higher global inflation and withdrawal of policy accommodation on consumer demand still need to be monitored closely going forward, Ho added.

Korea’s manufacturers are positioned widely across global supply chains and the nation’s export data comes out ahead of peers, providing an early pulse check on the strength of world trade.

An economic recovery in the US has helped shore up Korean exports, with demand for technology products such as displays and semiconductors staying resilient. Refined-oil exports have also gotten a boost from higher energy prices.

With an economy heavily reliant on trade, South Korea needs exports to remain strong to maintain economic momentum and provide room for the Bank of Korea to stick to its path of policy normalization. The central bank has raised rates five times since last summer, with the governor signaling more hikes to come.

Demand has been weakening in Europe and China since the Russian invasion and the lockdowns in China under its Covid zero policy. As those restrictions in Chinese cities are eased, trade with China should regain further momentum. 

“Exports to regions where economies are reopening, including the US, EU, the Middle East and Central/South America, are all growing too, making it too early to determine that exports are cooling just yet,” said Ha Keon-hyeong, an economist at Shinhan Investment Corp.

Overall exports to the US gained 29.2%, while those to Japan increased 19.3% and to the European Union were up 23.5%

Total automobile shipments advanced 18.9% in May from a year earlier, three times faster than in April when car exports rose 6.1%. Exports of wireless communications devices rose 8.4%, while shipments of petroleum goods jumped 107.2%.

Overall imports rose 32% from a year earlier, resulting in a trade deficit of $1.71 billion.