Early Harvest Brings Early End to South Korea’s Trade Boom — Panjiva
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Early Harvest Brings Early End to South Korea’s Trade Boom

Cons. Discr. - Autos 664 South Korea 384 Trade Balance 658 Trade Deals 703 U.S. 3310

South Korea’s trade 22 month trade boom came to an abrupt halt in September, Panjiva analysis of official data shows, with a 5.6% reduction on a year earlier. An 8.7% decline in exports was the main culprit in aggregate terms, though a 2.1% drop in imports didn’t help either. The export movement was well below the 0.8% expansion expected by economists surveyed by S&P Global Market Intelligence.

While it may be easy to point the finger at the expanding U.S.-China trade war the major reason is more prosaic – there were four fewer work days in September vs. a year ago due to the timing of the harvest festival holiday which started on September 24 this year vs. October 2 in 2017. There should therefore be an optical rebound in October this year.

SUDDEN SLUMP DUE TO SEASONALITY NOT REALITY

Chart segments change in South Korean trade by direction. Calculations based on Ministry of Trade and Industry figures.   Source: Panjiva

The largest single sector change came from the shipping industry where exports fell to $1.39 billion from $3.12 billion a year earlier. Excluding the shipping industry there was a 5.4% decline in total exports vs. a year earlier – again this includes the effect of a 17.0% drop in the number of working days in the month vs. a year earlier.

CHIPS UP, CARS SKID

Chart segments South Korean exports by product in September. Bubble size indicates total exports. Calculations based on Ministry of Trade and Industry figures.   Source: Panjiva

Importantly in terms of relations with the U.S. there was a 5.8% decline in exports vs. a 5.8% increase in imports from the United States. As a consequence the trade deficit narrowed to $1.51 billion while the 12 month trailing total reached $13.9 billion. That was the lowest since July 2012 and should prove to the administration of President Donald Trump that the revised KORUS trade deal, which has now be signed by both parties as outlined in Panjiva research of September, is “working”.

There may yet need to be revisions, however, with Trade Minister Kim Hyun-chong calling on the U.S. to exempt South Korea from the ongoing section 232 review of the automotive sector, Yonhap reports. With vehicle exports down 13.0% and autoparts by 4.2% in the past three months on a year earlier the government will be keen to avoid further shocks to the sector.

BAD FOR EXPORTERS TO AMERICA, GOOD FOR RELATIONS

Chart segments South Korean trade with the U.S. by direction (left hand axis) vs. 12 month trailing trade surplus (right) . Calculations based on Ministry of Trade and Industry figures.   Source: Panjiva

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