Global economy "canary in the coal mine" export growth slows down, while semiconductor exports still surge by 50.2%
Early trade data from South Korea shows that export growth has slowed this month, especially with a 23.5% increase in exports to the United States and a 5.6% increase in exports to China. Semiconductor exports continue to surge by 50.2%, driven by demand from smartphones and artificial intelligence. South Korea's export data is considered a "canary in the coal mine" for the global economy, but concerns remain about the South Korean won exchange rate. The strong exports have minimal impact on domestic prices in South Korea, and the central bank is expected to ease policies in the second half of the year. Developers are still actively addressing the challenges brought by the pandemic. The economic outlook for South Korea still faces headwinds
According to the latest information from Zhitong Finance and Economics APP, early trade data from South Korea shows that export growth has slowed down so far this month, dampening optimism about economic growth prospects. Data released by South Korea Customs on Friday showed that exports in the first 20 days of June increased by 8.5% year-on-year, lower than the 11.5% for the entire month of May. Imports slightly decreased by 0.6%, resulting in a trade surplus of $1.5 billion USD so far in June.
Sustained strong exports are crucial to the South Korean economy, with economic growth in the first quarter far exceeding expectations. The South Korean government expects that a rebound in trade will help the economy narrowly avoid a quarter-on-quarter contraction this quarter and is expected to achieve growth of around 2.5% in 2024.
According to South Korean Customs data, semiconductor sales have grown by 50.2% year-on-year so far this month, continuing to lead export growth. This is due to increased demand from smartphone manufacturers, data center operators, and artificial intelligence developers boosting semiconductor prices.
South Korean Customs data shows that exports to the United States increased by 23.5% year-on-year, while exports to China increased by 5.6%.
It is understood that South Korean companies are part of a global supply chain, especially in industries such as semiconductors, automobiles, and batteries. South Korea is also one of the first major export economies globally to release monthly trade data, providing important clues for investors to understand the health of global demand, hence being seen as a "canary in the coal mine" for the global economy.
So far, the strong export performance has had little impact on the trend of slowing domestic prices in South Korea, allowing the central bank to maintain its inflation expectations unchanged. This provides room for the Bank of Korea to ease policy in the second half of this year.
South Korea's headwinds continue. Developers are still struggling with debt accumulated during the construction boom period of the pandemic.
Concerns about exchange rates persist as South Korea heavily relies on imported energy and raw materials to assemble products for overseas shipment. The Korean won is one of the worst-performing currencies in Asia this year.
Ryu Jinlee, an economist at SK Securities, stated that export growth typically helps strengthen the Korean won, but the increasing investments by Korean retail investors in the U.S. market have weakened this effect, while geopolitical tensions further weigh on the Korean won