Exports adjusted for working-day differences gained 12.9% from a year earlier, just a tad shy of the previous month’s double-digit gain, data from the customs office showed Tuesday. Headline exports rose at a slower pace of 7.5% while imports increased 2.2%, widening the trade surplus to $6.7 billion.
Bloomberg“Semiconductors are still the leading driver of exports and the strong numbers so far this year have also been amplified by a comparison with the deep slump last year,” said Cho Chuel, an analyst at the Korea Institute for Industrial Economics & Trade. “Given the chip recovery began late last year, the strength may start to taper off, even though it’s unlikely to turn negative anytime soon.”The gains in exports this year have already prompted the central bank and government to raise their annual growth forecasts. Still, with inflation back at 2%, the Bank of Korea is expected to start cutting interest rates in the near-future.
The latest export figures may provide the central bank with a reason to wait longer before pivoting on policy, but many economists expect a rate cut next week. They see the BOK focusing more on weakness in domestic consumption and forecast a rate move if officials have sufficient confidence that household borrowing is easing.
In another sign that tech demand is continuing to fuel Korea’s exports, a separate statement showed semiconductor shipments rose 37.1% from a year earlier in September, for its 11th monthly increase. The result was only slightly weaker than August’s gain of 38.8%. The value of computer shipments jumped 132% and exports of wireless communications devices rose 19%, ministry data showed.
Sustained demand for memory chips used in artificial intelligence development has been a key driver of the nation’s economic momentum this year. Samsung Electronics Co. and SK Hynix Inc. are vying for greater shares of orders from Nvidia, a US chipmaker at the vanguard of the AI chip industry.
Tuesday’s data show that Korea continues to benefit from a global recovery. Automobile exports rose 4.9% from a year earlier while the sales of ships surged 76.2%, according to trade ministry data.
BloombergThe US has been a steady source of demand for South Korea’s products, while conditions in China have been choppier this year as the economy continues to limp along due to a property market slump. Authorities in Beijing unveiled an unusually broad array of economic stimulus steps last month, and South Korea stands to benefit if the measures prove effective in reviving growth.
“Given the relationship with China has become more competitive, stimulus may have limited impact on South Korea’s exports,” Cho said.
Exports to China grew 6.3% from a year earlier in September on the back of demand for chips and mobile devices, the trade ministry said. Meanwhile, shipments to the US increased 3.4% and those to the European Union rose 5.1%.
The outlook for demand from the US is a key area of interest for South Korea with growing economic and investment exchanges between the two countries. Having switched to an easing cycle with an outsized rate cut last month, the Federal Reserve is attempting to engineer a soft landing for the US economy.
Looming strikes across many of North America’s ports are among factors clouding prospects for commerce. Bloomberg’s Trade Tracker showed two out of 10 key measures of global commerce in “below normal” territory, while eight were in the normal zone.
