MOSCOW, November 1 (RIA Novosti) — South Korea reported a record month-on-month trade surplus in October, expanding from a year earlier boosted by US demand, while Korean imports fell on won volatility and lower domestic consumption, according to government figures released Saturday.
Seoul posted a $7.5 bln trade surplus, which is the highest monthly increase recorded, said the nation’s trade ministry today. Previous estimates for October’s trade surplus were about $5 bln, according to Bloomberg. A year ago, South Korea’s trade surplus was $4.88 bln.
Overall, exports reached $51.76 bln in October, which is 2.5% higher than in the previous month. It is the third time that South Korean monthly exports have exceeded $50 bln.
Imports, on the contrary, decreased by 3% to $44.26 bln. This October is the 33rd month of the nation’s trade surplus, according to Yonhap.
"Most key export items, including ships, computers, semiconductors and steel products, saw their shipments grow amid a significant rise in shipments to the United States and China," the Ministry of Trade, Industry and Energy said in a statement.
The trade surplus increase will contribute to further acceleration of economic growth in South Korea, which, in the 2nd quarter, was driven by domestic consumption and easy monetary and fiscal policies. However, yesterday’s unprecedented 60% expansion of the Bank of Japan’s stimulus may undermine positive South Korean trade dynamics, as the depreciating yuan contributes to the competitiveness of Japanese exports.
“U.S. demand for Korean goods is solid, especially before the holiday season. We may continue to see growth in exports until the end of this year,” Yoon Yeo Sam of KDB Daewoo Securities, as quoted by Bloomberg.
South Korean exports to the US skyrocketed by 25% year-on-year. Those to mainland China, which is the world’s biggest importer of South Korean goods, added 3.7%.
Exports to Japan slid 1.4%, and those to the EU fell 8.6%, which is easily explainable as both economies suffer from a vicious cycle of poor demand and looming deflation.
South Korea in October exported (annualized) 35.1% more ships (up to $4.31 bln) and 15.3% more computers (up to $0.74 bln). However, there was a significant decline in exports of automotive vehicles, which slid 13.9% (down to $3.94 bln); moreover, exports of mobile devices fell by 16.3% (down to $2.72 bln) as American Apple Inc. released its newest consumer itch, the iPhone 6. The trade ministry expects November exports to set new record heights if the current pace continues, with overall trade volume reaching $1 trln in 2014, which had also happened during the previous three years.
In order to support the trend, the Korean Central Bank is expected to take action of further monetary easing. “Lower export growth will weaken Korea’s economic outlook,” Ronald Man of Hong Kong-based HSBC said, as quoted by Bloomberg. There is only one risk to the Korean exports though: the depreciating yen. Luckily, the won fell 1.2% Friday to 1,068.82 to USD in its biggest decline since June 2013, and this trend might well continue on due to weak domestic investment and consumption. More Bank of Korea stimulus packages may be necessary in future.
South Korea’s imports dropped mainly due to slumping oil prices, as the nation imports a lot of hydrocarbons. The amount South Korea spent on oil decreased by 18.2% to roughly $7.2 bln, and the total volume of crude imported in October fell by 7.7%.
