South Korea's Export Growth Slows in September

By Cynthia Kim
SEOUL (Reuters) – The pace of South Korea's export growth slowed in September, with shipments to the United States losing momentum, raising market expectations for an easing of monetary policy as early as next week.

Exports increased 7.5% in September from a year ago, down from an 11.2% rise in the previous month, according to the customs service agency's report on Tuesday.

This result exceeded the 6.5% consensus estimate from analysts and was driven by a slower 3.4% growth in shipments to the United States in September, compared to an 11% increase in August.

As Asia's fourth-largest economy, South Korea's monthly trade data serves as a bellwether for global trade and is released first among major exporting economies.

The data arrives amid growing expectations that the Bank of Korea may cut policy interest rates from 3.50%, its highest since late 2008, in a meeting next Friday, as concerns over growth overshadow inflation worries.

Slower export growth may provide the Bank of Korea (BOK) with more reasons to cut interest rates, following declines in both private consumption and construction investment in the second quarter.

"Given how sluggish domestic demand has been, Tuesday's data bodes well for an interest rate cut, but the board members must assess financial stability risks," commented Park Sang-hyun, an economist at HI Investment and Securities.

"It is clear that South Korea will find it difficult to see the big, U.S.-bound exports boom it enjoyed in past years."

Shipments adjusted for working day differences rose 12.9% year-on-year. By destination, export growth to China, Japan, and India all moderated compared to August.

Key products supporting South Korea's export growth included semiconductors, which surged 37.1% on-year to a record $13.6 billion in September.

Exports of cars rose 4.9%, while shipments of mobile communication devices increased 19.0%.

However, imports climbed only 2.2%, falling short of the 3.0% rise forecast by analysts.

The preliminary trade surplus widened to $6.66 billion, up from $3.77 billion a month earlier. In September, there were also fewer working days due to a longer break for the Chuseok thanksgiving holiday.