South Korea’s early exports sink in sign of weakening demand

South Korea’s early exports dropped in October, suggesting a weakening of demand that reinforces signs of a slowdown in the global economy.

Daily shipments declined 9% on average in the first 20 days of the month compared with a year earlier, the customs office said Friday. It was the first time in two years that the reading, which reflects working-day differences, had fallen and a clear sign of cooling momentum.

Headline exports also fell 5.5% for a trade deficit of $5 billion. Korea’s chip sales dropped 12.8% in the first 20 days, while shipments to China declined by 16.3%, today’s data showed.

Korean export momentum is weakening and trade deficits are mounting as a combination of Russia’s war on Ukraine, Covid lockdowns in China and interest-rate hikes weigh on the world economy. The won has also depreciated rapidly, increasing the cost of imports and eroding the bottom lines for manufacturers.

Exports are poised to weaken further as China’s economy slows and global chip demand eases, Bank of Korea researchers said in a report earlier this week. Geopolitical tensions between the US and China, rising trade barriers and the Biden administration’s Inflation Reduction Act are other risks to Korean trade, they said.

Korean tech sales have been among the earliest sectors to take a hit from a slowing global economy. Wireless communication devices sold 15.6% less than a year earlier in the first 20 days of October while exports to Taiwan, another chipmaking powerhouse, plummeted 26.7%, the customs office said.

Still, overall shipments to the U.S. increased 6.3% and those to Vietnam edged up 1.7%. Meanwhile, imports from China increased 10.9%, suggesting Korea’s trade deficit with the world’s second-largest economy will continue to swell, the data showed.