Underlying Export Data Still Soft, But China Demand May Improve

The headline South Korea export result was slightly better than expected, with exports at -7.5% y/y, versus the -8.8% consensus forecast. Still, as Feb this year had two more workings day compared to Feb last year this inflates the extent of any improvement. Average daily exports were still around recent lows at -15.9% y/y.

• The detail showed similar trends to recent months, with chip exports still weaker, -42.5%. Some offset came from firmer car exports. Imports were slightly lower than expected (+3.6% y/y, +4.1% forecast). This left the trade balance in a slightly better position, -$5.3bn, versus -$6.01bn forecast.
• By country, export growth to China remained fairly downbeat -24.2% y/y. This was a slight improvement in terms of the prior month (-31.4%) but the trend isn't showing the same degree of improvement as reflected in today's manufacturing PMI result for China, see the chart below. The correlation between the two series is around 25% over the past 3 yrs,
• The South Korea authorities do hope for better export growth form China as we progress through 2023.
• Trends were better to the US (+16.2%) and the EU (+12.0%). Interestingly, the strength in exports to the US points to a more resilient US ISM picture (which prints late today), see the chart below. The correlation between these two series is around 65% over the past 3 years.
• The obvious caveat is that other survey data has been pointing to a less supportive ISM backdrop.

Fig 1: South Korea Export Growth To China and China PMI

Source: MNI - Market News/Bloomberg

Fig 2: South Korea Export Growth To The US and US ISM

Source: MNI - Market News/Bloomberg