By Jihoon Lee
SEOUL (Reuters) – South Korea’s exports likely grew at the slowest pace in nearly two years in September, weighed by a weak global economy led by China, a Reuters survey showed on Thursday.
The country’s outbound shipments were expected to grow 2.9% from the same month last year, according to the median of 17 economists’ forecasts, slowing from a 6.6% increase the previous month.
That would extend annual gains in shipments into the 23rd straight month, but represented the slowest pace in the series, after three months of single-digit growth rates.
Shipping data from Korea provides an early health check on global business, as auto chip manufacturers in Asia’s fourth-largest economy import massive amounts of raw materials and spread widely in the global supply chain.
The slowing momentum of South Korea’s exports comes amid weak global demand as many countries aggressively raise borrowing costs to combat rising inflation. China’s struggle to contain the COVID-19 outbreak has also hurt consumption.
During the first 20 days of this month, exports contracted by 8.7% year on year, also affected by the calendar effect of reducing working days. Sales to China fell 14.0% during this period, after a full three months of declines.
“South Korea’s export momentum is likely to have weakened further in September, with shipments of electronics declining amid further indications of waning global consumer demand,” said Lloyd Chan, chief economist at Oxford Economics.
“The outlook for South Korea’s merchandise exports will be tough in the coming months as global growth weakens.”
Imports were expected to outpace exports with a growth of 16.4%, but it would also be slower than the 28.2% increase in the previous month and the weakest since February 2021.
Altogether, it would lead to a trade balance deficit for the sixth consecutive month, but by a much narrower margin than a record monthly deficit of $9.49 billion in August. In the poll, 10 economists gave a median deficit forecast of $3.45 billion.
The full monthly trading data is due to be released on the first day of October.
The poll also forecast the country’s annual inflation would remain steady at 5.7% in September, after declining in August for the first time in seven months. It hit a 24-year high of 6.3 percent in July.
However, the poll of 11 economists showed some splits with five predicting the inflation rate will decline further, three picking up no change at 5.7%, and the other three seeing a rebound.
Regarding factory production in South Korea, economists expected production to extend its decline for a second month in August, falling 0.5% on a seasonally adjusted monthly basis, after falling 1.3% in July.