South Korea’s export growth slowed in February to its weakest in more than a year, government data showed yesterday, showing the effects of a long Lunar New year holiday and a slip in overseas demand for some Korean goods.
The 4% year-on-year increase in exports was the slowest expansion since November 2016 and deeply underperforms a 22.3% jump in January, but was better than the median estimate for a 0.4% increase.
Shipments were hit by fewer working days due to the change of the timing of the Lunar New Year.
There were 19.5 working days in February this year, versus 22 last year.
Combining January and February, exports surged 12.8 year-on-year, evidence that overseas demand is strong enough to support solid growth in the first quarter.
“This slowdown is likely to be temporary, exports will continue to grow going forward on solid demand for Korean goods,” said Kim Doo-un, an economist at Hana Financial Investment.
Economists expect South Korea’s exports to grow at a slower but steady pace in 2018 after 2017’s bumper growth, reflecting a statistical base effect from last year’s strong performance and ongoing trade friction with the United States.
Bank of Korea governor Lee Ju-yeol said on Tuesday that the auto and steel industries could be hit hard if US trade curbs were to be further stiffened, because they run the biggest trade surpluses with the United States.
The US Commerce Department has recommended President Donald Trump impose steep curbs on steel imports, including those from South Korea, after slapping bigger taxes on washers and solar panels in January.
“Further wild cards will be the renegotiation of the Korea-US Free Trade Agreement.
How the talks unfold will affect export sentiment,” said Kim at Hana.
Trump has criticised the current US trade deficit with South Korea, while South Korean President Moon Jae-in has said the Korea-US FTA benefits both countries by expanding their trade.
Shipments to China, South Korea’s largest trading partner, rose 3.7% year-on-year in February in a 16th straight month of growth. Exports to the United States dropped 10.7% as American demand for South Korean cars waned while mobile phone sales receded as consumers waited for new model launches, the trade ministry said. Imports from the United States jumped 16.8% in February, shrinking South Korea’s trade surpluses with the United States to $360mn for the month, down 77% from February last year.
Four of South Korea’s 13 major export items posted double-digit expansion from a year earlier, even as the month had two and a half fewer working days than in February last year.
Overall imports jumped 14.8% in February from a year earlier, exceeding the 13.1% expansion seen in the survey.
Annual import growth in January was 21.1%.
Hanjin Shipping’s container terminal is seen at the Busan New Port, about 420km southeast of Seoul. Economists expect South Korea’s exports to grow at a slower but steady pace in 2018 after 2017’s bumper growth, reflecting a statistical base effect from last year’s strong performance and ongoing trade friction with the US.
