The numbers are skewed by the timing of the Lunar New Year holiday, but nevertheless, South Korea’s 14th consecutive month of declining exports makes for bad optics.
Shipments contracted 6.1% this month, the global demand bellwether said Saturday. That’s better than the expected 8.6% decline and, again, holiday effects were at work. Specifically, January had 21.5 working days this year, 2.5 less than last year.
But the numbers are set against pandemic worries, which have shaken the market’s faith in the notion that an abatement of trade tensions between the world’s two largest economies might help usher in an inflection in global growth. Given that, the optics leave something to be desired.
If you can get past the “14 months in a row” headline, you’ll discover that average exports per working day actually moved higher by 4.8% YoY. In other words, when you strip out calendar effects, you get the first positive print in more than a year.
Semi exports fell just 3.4% in January. That’s the smallest decline since December of 2018.
December’s contraction was much shallower than expected, stoking optimism headed into the new year. Shipments to China, the country’s largest trading partner, actually rose last month. They fell 10.5% in January, though, and while exports to Hubei province comprise just a tiny fraction of the total, a deep slump in the Chinese economy from the Wuhan virus could postpone South Korea’s export recovery. We addressed this explicitly earlier this week.
The first-20 days figures for January were good, and last week’s GDP beat was welcome news for an economy that’s been beset by trade concerns for more than a year. Earlier this month, Seoul said the economy grew far faster than expected in the fourth quarter, expanding 1.2% QoQ, the quickest since the third quarter of 2017.
Meanwhile, inflation has recovered after the country briefly flirted with outright deflation in September.
Still, concerns linger, and the pandemic scare has made things considerably more precarious at a time when relations with Japan are still sour, and Donald Trump’s honeymoon with Kim Jong-Un ended in something akin to acrimony.
The government is front-loading spending in a bid to juice the economy, but, again, the worry now is that the fiscal boost could be offset (at least a little bit) by the economic impact from the spread of the coronavirus.
South Korean equities dove nearly 6% this week, in the worst stretch since October 2018.
The won, meanwhile, is in a tailspin. This was the worst week for the currency against the dollar since May, when Donald Trump broke the Buenos Aires truce with Xi.