Korea: Merchandise exports decline at sharp rate in August, although underlying picture is more positive
Merchandise exports fell 9.9% in annual terms in August (July: -7.1% year-on-year) amid still-tepid external demand. However, a lower number of working days compared to the same month last year was also behind the decline, and daily exports fell a mere 3.8%—the softest decline since the beginning of the Covid-19 outbreak. Meanwhile, merchandise imports collapsed 16.3% over the same month last year in August (July: -11.6% yoy), marking the sharpest drop since May. As a result, the merchandise trade balance recorded a USD 4.1 billion surplus in August, remaining unchanged from July. Lastly, the trend improved, with the 12-month trailing merchandise trade balance recording a USD 36.4 billion surplus in August, compared to the USD 33.9 billion surplus in July.
On August’s reading, and their outlook for exports ahead, analysts at Nomura commented:
“The August exports data reaffirm that two trends are underway. First, the rise in average daily exports confirms the gradual improvement in the export cycle. We expect this uptrend to continue. […] Second, much of the demand for Korea’s exports is driven by structural shifts as rising demand for IT and biohealth products, reflecting a rapid adoption of work from home, rising digitisation and building of health capacity to prepare for sporadic surges in infection rates. […] We maintain our view that the gradual recovery of Korea’s export growth will sustain in Q3, although there remains high uncertainty surrounding the path of the global economic cycle.”