Korea: Merchandise exports lose steam in June but stay robust
Merchandise exports soared 39.7% in annual terms in June, on the heels of May’s 45.6% jump. Meanwhile, merchandise imports jumped 40.7% over the same month last year in June (May: +37.9% yoy), marking the best result since May 2010. In detail, the slowdown in export growth was mainly due to automobile exports growth losing steam from the previous month, potentially linked to disruptions in production due to the chip shortage. In addition, exports of petrochemicals and general machinery lost momentum. Contrastingly, automobile parts and semiconductor exports soared at a much steeper pace.
As a result, the merchandise trade balance improved from the previous month, recording a USD 4.4 billion surplus in June (May 2021: USD 2.9 billion surplus; June 2020: USD 3.4 billion surplus). Lastly, the trend pointed up, with the 12-month trailing merchandise trade balance recording a USD 52.4 billion surplus in June, compared to the USD 51.3 billion surplus in May.
On the outlook for exports, Jeong Woo Park, economist at Nomura, said:
“We believe that Korea’s export cycle is near its peak and the pace of export growth will likely be slower than markets expect for the following reasons […]: Exports to China have contracted sequentially for the past three months, consistent with the softening of China’s manufacturing PMI […]; Export growth has benefited from higher chip and oil prices, even as export volumes have been stable. However, with favorable base effects fading, the boost from price effects will likely weaken.”