South Korean Export Growth Sputters as Global Headwinds Rise

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South Korea’s export momentum moderated last month in a sign that the latest rally driving economic growth may be starting to taper off, adding to uncertainties fueled by deepening geopolitical risks and the upcoming US election.

Exports adjusted for working-day differences edged 0.2% lower in October from a year earlier, data from the customs office showed Friday. Headline exports advanced by 4.6%, missing consensus estimates and marking a slower pace versus the previous month, while imports increased 1.7%. The data resulted in a trade surplus of $3.2 billion.

Friday’s weak data underscore risks for South Korea’s economic growth outlook. With domestic consumption somewhat spotty, the nation has relied on external demand to drive activity this year. The figures give the Bank of Korea an added incentive to accelerate its easing cycle after its policy pivot to rate cuts last month.

Exports may have already peaked this year, and higher value-added products will need to be a driver from here on, said Kim Dong-soo, a researcher at the Korea Institute for Industrial Economics & Trade. High-bandwidth memory for example led the growth in export value for semiconductors in recent months while more conventional types are seeing their prices decline.

Oil products largely weighed on overall exports in October, with shipments plunging 34.9% from a year earlier as petroleum prices fell, according to a separate statement from the Trade Ministry. South Korea has one of the biggest refinery clusters in the world and processes its oil holdings for exports to help drive economic growth.

What Bloomberg Economics Says...

“The headline reading understated the weakness — without a boost from a calendar distortion, the slowdown in exports would have been even sharper. Stripping out that effect, average daily shipments declined from a year earlier for the first time since September 2023.”

— Hyosung Kwon, economist

Click here to read the full report

As the world’s biggest source of memory chips, the country also serves as a barometer of global economic activity, as its devices are integral components in products ranging from computers to smartphones.

That trend continued in October, with semiconductor exports rising 40.3% from a year earlier, according to the Trade Ministry. While that’s a pick-up versus the prior month, it’s still weaker than the 50%-plus growth seen for most of the year.

“The ongoing upturn in the tech sector looks set to remain a key tailwind and would probably continue to benefit Asian exports more than in other regions,” Sheana Yue, an Oxford Economics analyst, said in a note before the release. “Nonetheless, our forecast of a slight uptick in global growth next year suggests goods exports is unlikely to be spectacular in 2025.”

Demand from the US and China is key for export momentum. The US has been a robust buyer of South Korean products this year, including high-bandwidth memory chips that companies such as Nvidia use to assemble AI chips.

On Thursday, Samsung Electronics Co., South Korea’s biggest exporter, reported semiconductor revenue that undershot forecasts and said it was making “meaningful” progress in its bid to win HBM orders from a major client, which analysts say is probably Nvidia.

Smartphones, another major source of income for South Korea, might face cooler demand in the year ahead. Samsung said in a conference call that the global smartphone market is expected to grow less than 1% in 2025 after expanding more than 2% this year.

Global commerce, which South Korea heavily relies on for earnings, may undergo a shift depending on who wins the US election next week. South Korea is among nations most vulnerable to trade tensions between the US and China as exports underpin its economic growth.

Its major companies also operate factories in both countries, including SK Hynix Inc., Hyundai Motor Co. and Samsung, which has won billions of dollars in subsidies from the US for building a plant in Texas.

South Korea’s exports to the US rose 3% from a year earlier in October, the Trade Ministry said. Shipments to China grew 11% in the same month, it said.

Conditions in China have been less favorable this year as the economy continues to limp along due to a property market slump. Beijing launched a broad array of economic stimulus steps in recent months, and South Korea stands to benefit if those measures prove effective.

Conflicts in the Middle East and Russia’s ongoing war in Ukraine, which may now involve North Korean troops, have also raised concerns among South Korean policymakers overseeing trade.

South Korea’s exports in real terms fell last quarter, prompting policymakers to consider revising down their forecast for 2024 economic growth. BOK Governor Rhee Chang-yong said the growth in gross domestic product could ease closer to 2.2%.

The BOK will announce its latest growth projection when it holds a policy meeting in late November. The board reduced the key interest rate to 3.25% last month after the Federal Reserve pivoted to an easing cycle with an outsized cut in September in an effort to engineer a soft landing for the economy.

(Updates with economist comments and more details)

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