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Year-over-year exports from South Korea rose for the first time in 13 months amid higher shipments to two of the world's largest economies. However, future sustainability of the export-based economy is made uncertain by questions surrounding the removal of global stimulus measures.
Overall shipments rose 18.8% to $34.3 billion in the first 20 days of November, Korea's Ministry of Knowledge Economy said yesterday (Tuesday). Roughly one-third of shipments were to the stimulus-backed economies of China and the United States, where exports increased by 52% and 6.1%, respectively.
"Fading global stimulus measures will be the main worry for Korean exports," said Park Sang-Hyun, chief economist at Hi Investment & Securities Co. Ltd. "The rising won is also a concern."
The median estimate of 12 economists surveyed by Bloomberg News called for a rise of 22.8%.
Korea was up against a month last year in which exports practically collapsed when consumers shut their wallets as the recession was exacerbated by the banking crisis that sent world markets spiraling. One year later, stimulus efforts in emerging and developed economies have helped markets recover and created marginal demand in categories like automobiles and housing.
Poor year-ago export numbers are expected to help Korea clear a low bar in the coming months, several economists say. But the data from November is below the nation's September shipments, and this is a time when exports typically rise with increased demand for the holidays.
"Demand from developed countries is seen slowing down as governments are withdrawing stimulus spending," said Hi's Park. "Black Friday sales were quite disappointing, and car sales are expected to fall once incentives are no longer provided. A recovery in demand will be very slow."
The U.S. government's "Cash for Clunkers" auto incentive ended in August, resulting in a 14.3% drop in September's auto sales. However, car sales in October bounced back sharply, rising 7.4%. In China, a sales tax break on small cars is in effect until the end of the year and could be extended.
Consumer spending in the United States continues to remain on shaky ground as the unemployment rate continues to rise, with most economists not seeing a bottom until some time in the first or second quarter of next year.
As uncertainty about Korea's near-term exports looms, its central bank said Monday its own stimulus policies are still needed.
"Since the global economy is unlikely to post a strong recovery, policy efforts by the government and central bank are needed," said Bank of Korea Deputy Governor Kim Jae-chun.
Despite this uncertainty, the chances of a double-dip recession are slim, Kim says, adding that it would take another meltdown in the financial markets or a failure of the private sector to recover on its own.
News and Related Story Links:
S. Korea Exports Rise 18.8% From Year Ago
- Bloomberg News:
South Korean Exports Rose For First Time in 13 Months
- Money Morning:
Bargain Hunters Turn Out for Black Friday
S. Korea to Keep Accommodative Policy – Officials