SEOUL (Reuters) - Advanced economies stepped up their purchases of goods from South Korea last month, data showed on Tuesday, a hopeful sign global consumption will underpin Asia’s export-reliant economies even as slackening demand in China drags on regional growth.
Encouragingly, the South Korean exports data for March showed consumers were in good heart in the United States and backs the Federal Reserve’s optimism the world’s biggest economy is on a firmer footing.
The data, the first from a major exporting economy to report monthly trade figures, showed exports rose by an annual 5.2 percent last month, up from a 0.7 percent gain for the January-February period which is often combined to mitigate distortions from Lunar New Year holidays.
Shipments to the United States and the European Union jumped 17 percent and 15.2 percent in annual terms, respectively, the trade ministry said, quickening from 6.7 percent and 10.6 percent in February.
“The pickup in shipments to Europe and the U.S. suggests that the spillover effects from stronger economic growth in those economies are starting to materialize,” said Park Sang-hyun, chief economist at HI Investment and Securities.
While it’s too early to draw firm conclusions, the solid uptick in exports brightens the outlook for South Korea and is a promising sign for others in the region, notably Japan and Taiwan.
South Korea, Asia’s fourth-largest economy, is home to some of the world’s top makers of cars, ships and smartphones and is often seen as a bellwether for consumer demand globally.
Still, the external picture is clouded somewhat by the worries of a deepening slowdown in China and the consequent impact on global growth prospects this year.
Indeed, sales of goods to China, the largest market for South Korean exporters, grew a disappointing 4.5 percent in March, up from 2.1 percent for the January-February period but below an 8.6 percent rise for 2013.
Lee Ju-yeol, who last month took over as the Bank of Korea’s new Governor, underlined the tenuous outlook for China.
“It is still uncertain whether the Chinese economy, having emerged as a G2 economy along with the U.S., will continue its stable growth,” Lee said in his inaugural speech. <ID:S6N0IM02R>
The slowdown in China’s economy, the world’s second-biggest, has spooked global markets in recent months on fears that it will carve out a big chunk from world output.
The Asian Development Bank’s latest forecast is for Asia ex-Japan to post average growth of 6.2 percent this year and 6.4 percent next year, up from an estimated 6.1 percent in 2013.
While global names such as South Korea’s Samsung Electronics (005930.KS) and car maker Hyundai Motor Co (005380.KS) often steal the limelight with their clout in world markets, the nation has also become more diversified in its exports-base.
This is one of the key differences that sets it apart from the rest of Asia, including its rivals Japan, China and Taiwan.
Taiwan’s exports in the first two months of 2014 rose just a sliver from a year earlier, while Japan’s lagged expectations in February, partly hurt by weaker exports to the U.S. due to bad weather there.
To be sure, South Korea’s economic recovery is still not firmly entrenched.
This was highlighted in the March data, which showed overall exports growth for the first quarter slowed to an annual 2.2 percent from a 4.7 percent rise in the preceding quarter.
In a further note of caution on global demand, the Kexim Overseas Economic Research Institute, run by the state-run Export-Import Bank of Korea, forecast on Tuesday annual export growth to remain low at around 3 percent for the second quarter due to a delayed recovery in key developing economies such as China.
HI Investment and Securities’ Park also said that “it may be premature to expect a widespread pickup in demand for Korea or other exporting countries.”
Other key monthly economic data released separately on Tuesday showed South Korea’s economy continued its recovery but the pace was still modest at best.
The HSBC/Markit purchasing managers’ index survey results for South Korea’s manufacturing sector showed modest growth in activity during March. Respondents in the survey mentioned export orders from China, according to Markit Economics.
Consumer inflation picked up to an annual rate of 1.3 percent in March from 1.0 percent in February, but it remained far below the bottom end of the central bank’s target band of between 2.5 percent and 3.5 percent.
Data from the country’s top mortgage lender also showed improving sentiment among South Koreans as housing prices across South Korea rose for the seventh consecutive month in March and by the fastest rate in 28 months.
Editing by Choonsik Yoo & Shri Navaratnam