South Korea October exports post worst drop in over 6 years

PUBLISHED : Sunday, 01 November, 2015, 5:07pm
UPDATED : Sunday, 01 November, 2015, 5:07pm

South Korean exports slumped the most in more than six years in October, with hefty drops in shipments to China, the United States and Europe suggesting a further weakening in global demand.

The trade ministry attributed the declines mainly to a sharp fall in ship contracts and low oil prices, but the sharper-than-expected deterioration is likely to add to fears that a deeper chill is settling over the international economy.

Exports fell 15.8 per cent on-year to US$43.5 billion in October, their 10th straight month of declines and the sharpest fall since August 2009, trade ministry data showed on Sunday.

Imports slumped 16.6 per cent to $36.8 billion.

Economists polled by Reuters had expected a 14.5 per cent drop in exports and a 13.4 per cent fall in imports.

The trade surplus fell to $6.7 billion in October from a revised $8.9 billion in September.

The slump in exports was partially expected by economists as South Korea posted a record high in shipments last year.

The average export value per working day was $1.89 billion in October, less than a revised $2.02 billion in the previous month, Reuters calculations showed.

“Judging by the smaller average daily export value, export momentum is still weak and it will affect fourth-quarter growth. Consumption is on the rise but without exports recovering it will be difficult for 2015 GDP to rise as much as the government wants,” said Park Sang-hyun, chief economist at HI Investment & Securities.

Park added, however, that he did not believe the Bank of Korea would cut interest rates in the coming months as third-quarter growth was robust and policymakers would want to see full-year growth data, which will be released early in 2016.

The current base rate stands at 1.50 per cent.

Earlier this month, central bank estimates showed third-quarter GDP growth rose at its fastest pace in five years as consumption recovered.

Details from the trade ministry showed South Korea’s exports to China, the US and Europe all fell in October from a year earlier, with shipments to top market China down 8.0 per cent, to the United States 11.4 per cent and to the EU down 12.5 per cent.

South Korea is the first major exporting economy to report monthly trade data and is home to global suppliers such as Samsung Electronics, Hyundai Motor and Hyundai Heavy Industries.

Samsung Electronics warned on Thursday that earnings would fall sequentially in the fourth quarter due to seasonal weakness in demand for components, and as currency conditions - which added 800 billion won ($702 million) to profit in the third quarter - became less favourable.