Pantheon with the note. Korean exports are a great leading indicator for global growth.
- Korea: headline 20 day exports fell 2.7% y/y in January, improving from -8.8% in December. Bloomberg reports no consensus.
- 20 working-day exports dropped 8.8% y/y in January, unchanged from December. Bloomberg reports no consensus.
Working-day adjusted exports extended their rapid pace of decrease of 8.8% y/y in the first 20 days of January, unchanged from December.
The different timings of the lunar new year, this year compared with last, explain the apparent improvement in year-over-year headline data, despite the weak underlying trend. Headline 20-day exports moderated their decline by 6.1pp to -2.7% y/y in January.
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By market, export growth to the E.U. and Japan improved, while shipments to the U.S. extended strong growth and trade with China continued to plunge. Headline exports to the E.U. rose 16.7%, up from 1.1%, while shipments to Japan climbed 3.3%, up from -12.8%. Exports to the US accelerated 2.1pp to 18.1%, while those to China moderated 2.3pp to -24.4%. This is all non-working day adjusted data, so the underlying trend would be weaker, with probably no improvement in trade with the U.S. and China.
By product, ship exports rocketed 116.3% y/y, but this is a volatile series owing to the lumpy nature of ship deliveries. Mobile phone exports posted a turn-around to 19.7% growth from -43.8% decline, though other electronics exports, such as semiconductors, computer accessories and household electronics are plummeting at 30-to-50% y/y. It is too soon to call an upturn in global consumer demand for gadgets. Car exports continued extraordinary growth of about 45%, as car makers fulfilled with order backlogs stemming from the previous auto chip shortages.
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We think that Korean exports will likely remain on a downward trend given the poor economic prospects in its major markets. GDP is likely to fall in the U.S. and the Eurozone in Q1, while China probably will start to recover only in March. The Korea International Trade Association forecasts exports to fall 4% in 2023.
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Exports and their impact on Korea’s growth are top of mind for policymakers. BoK Governor Rhee said on January 18 that his three top worries for 2023 are exports, high oil prices and a property sector downturn. The Bank probably will probably rates steady at 3.5% at its February 23 policy meeting, trusting that the stronger won since November and lacklustre economy will pull down consumer inflation.
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