South Korean exports fell for an 11th straight month last month, while foreign orders shrank at a sharper pace, pointing to a further deterioration in global demand and prompting some analysts to call for more interest rate cuts.
Last month’s export data and a private manufacturing survey highlighted persistent downward pressure on Asia’s fourth-largest economy from weak external demand, with factory activity shrinking for the ninth straight month, but the activity survey, combined with other data in recent weeks, also suggested that the weak trade outlook was being offset in part by a recovery in domestic consumption, which could make policymakers more cautious about further easing.
Exports fell 4.7 percent year-on-year last month, less than an 8.3 percent fall forecast in a Reuters poll, government data showed.
However, several analysts said that the decline would have been much worse if not for big ship deliveries.
“Headline exports without vessels would have fallen 12 percent,” Barclays PLC economist Wai Ho Leong said. “The broader trend remains unchanged — marked by high inventories, slower inventory clearance and a lack of production.”
The South Korean Ministry of Trade, Industry and Energy said export prospects remain bleak as China and emerging economies were still slowing, while Europe as a whole was struggling to regain economic momentum.
Minutes released late yesterday from the last Bank of Korea meeting on Nov. 12 showed some members of the policy board were more doubtful of the economic recovery than Bank of Korea Governor Lee Ju-yeol, who has seemed reluctant to cut rates again.
“Weakness in exports will persist for a while and I feel downside risks to growth have increased,” one member said in the anonymous minutes.
Exports to the EU soared 52.5 percent last month year-on-year, but mainly due to increased sales of ships. Exports to China, South Korea’s biggest trade partner, fell by 6.8 percent, their fifth straight monthly contraction.
Imports fell 17.6 percent last month, leaving the trade surplus at an all-time monthly high of US$10.4 billion.
Meanwhile, consumer inflation data and the manufacturing survey suggested that domestic demand held firm last month, which supported optimism expressed by the government and the central bank for a consumption-led economic recovery.
Last month’s inflation rate edged up to 1 percent from a year earlier, a one-year high and beating expectations.
The Nikkei/Markit purchasing managers’ indices underscored the division between domestic and overseas demand. New export orders fell more sharply last month than in October, but orders from domestic customers improved.
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