Export Growth Slowing, But Detail Better Than Headline Drop

The headline drop in exports for the first 20-days of September of -8.7% y/y looks awful but the detail is not as bad. After accounting for fewer working days this September, average daily exports were +1.8% y/y. Chip exports also rose 3.4% y/y, which has been a recent source of weakness. There is also some light at the end of the tunnel for the trade deficit position.

• The country level detail showed China exports fell by -14% y/y, while to the US were down 1.1% y/y for the first 20-days. This shows that medium term headwinds to export growth persists though, amidst a weaker growth backdrop for China, see the chart below.

Fig 1: South Korea Exports - Total & China y/y

Source: MNI - Market News/Bloomberg

• The trade deficit was still wide at -$4.1bn for the first 20-days, but well in compared to August levels (-$10.2bn).
• Given the fact the full trade position for the whole month tends to improve on the first 20 day reading, we could see even further improvement once the data for the whole of September is released (October 1).
• The longer term trend still looks poor, see the second chart below. It may also be too early to declare victory. Recall earlier in the week reports suggested the country is on track to fill LNG reserves to 90% by November. Such flows should keep the energy import bill higher, all else equal, and by extension the trade deficit wider.

Fig 2: South Korean Trade Balance Trends

Source: MNI - Market News/Bloomberg