S Korea Sept petchem exports slips 0.6%; overall shipments continue growth momentum

SINGAPORE (ICIS)–South Korea’s overall export growth slowed in September, as petrochemical exports dipped 0.6% year on year to $3.84 billion, fueling expectations of a potential monetary policy easing next week.

• Total exports grew for 12th straight month in September
• Economists expect central bank to soon cut its benchmark interest rate
• Overall shipments to China, US surge in September

The country’s headline export growth slowed to 7.5% year on year in September at $58.8 billion, down from 11.4% in August, data from the Ministry of Trade, Industry and Energy (MOTIE) showed on 1 October.

This marks a full year of continuous growth for South Korean exports, fueled by record-high semiconductor sales and the strongest September performance ever for automobile exports.

Exports of chemical, steel, and oil products weakened in September, with falling oil prices dragging down the export prices of those products, according to Japan’s Nomura Global Markets Research.

The slowdown was mainly attributed to fewer working days due to a three-day public holiday on 16 September.

South Korea’s automobile industry saw a resurgence in September, with auto export growth rebounding to 4.9% year on year after contracting by 4.3% in August.

This positive shift followed three consecutive months of decline and was driven by a recovery in demand for environmentally friendly cars like hybrids and electric vehicles, according to Nomura.

The return to growth also reflects a normalization of production schedules after disruptions caused by summer breaks and labor strikes, which had previously hampered the industry, it added.

Meanwhile, South Korea’s import growth also decelerated to 2.2% year on year in September, down from 6.0% in August due to weaker energy imports.

This resulted in a wider trade surplus of $6.7 billion, compared with August’s $3.83 billion.

By region, exports to China reached their highest point this year at $11.7 billion, marking a 6.3% increase, driven by demand for semiconductors and wireless communication devices, according to MOTIE.

This surge also led to a trade surplus of $0.5 billion with China, MOTIE data showed.

Shipments to the US also hit a record high for September with $10.4 billion in exports, a 3.4% rise, and extended its 14-month growth streak.

Exports to the EU climbed 5.1% to reach $6 billion, fueled by strong demand for IT goods.

STRONG EXPORTS TO SUPPORT INTEREST RATE CUT IN OCTOBER
With solid exports easing recession concerns amid weak consumption, the Bank of Korea (BOK) is expected to deliver only a 25-basis point cut at the upcoming 11 October meeting to ease the household financial burden and aid consumption growth, according to Nomura.

“However, although tighter macroprudential measures are having an impact in slowing housing price inflation and household debt growth, we expect the BOK to remain focused on controlling housing prices and market expectations about the number of rate cuts in this easing cycle.”

Separately, data from Wednesday showed that South Korea’s consumer price index (CPI) slowed more than expected in September, rising 1.6% year-on-year, the weakest annual increase since February 2021.

This brings the inflation rate below the BOK’s 2% target, fueling further expectations of an interest rate cut.

Core CPI, which excludes volatile food and energy items, rose by 2.0% year on year, slower than the 2.1% expansion the previous month and the weakest since November 2021.

The BOK has held interest rates at a 16-year high of 3.50% since August, citing financial stability concerns amid a hot housing market.

The BOK in July slashed its 2024 growth forecast to 2.4% from 2.5% previously, after Asia’s fourth-largest economy unexpectedly contracted in the second quarter.

South Korea’s economy posted a slower second-quarter annualized growth of 2.3%, compared with the 3.3% pace set in the preceding quarter amid sluggish domestic consumption.

Focus article by Nurluqman Suratman