South Korean memory chips lift national exports in January for a strong start to 2024

South Korean exports maintained growth momentum in January in a positive start to 2024, as demand for semiconductors continued to improve.

Shipments adjusted for working-day differences increased 5.7 per cent from a year earlier, according to data released Thursday by the customs office. Headline exports rose 18 per cent, compared with economists’ forecasts for a 17.6 per cent increase, with the outcome helped by more working days compared with a year earlier. Overall imports declined 7.8 per cent, as the trade surplus narrowed to US$300 million.

While the growth in holiday-adjusted exports moderated from about 14 per cent in December, a closer look shows demand for South Korea’s leading products stayed robust.

The biggest driver of the export rebound has been memory chips. Semiconductor exports increased 56.2 per cent from a year earlier in January, the customs office said, in the biggest rise since December of 2017.

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“Electronics export growth momentum in both Taiwan and Korea in recent months has been particularly strong,” Citi Research analysts led by Johanna Chua wrote this week. “If the tech upcycle broadens out, it should be more economically meaningful to Vietnam, Singapore and Malaysia.”

Other drivers of South Korea’s exports include automobiles, petrochemicals and shipbuilding, which underpin the nation’s broad industrial base. Many Korean products are embedded across a wide swath of global supply chains, making the nation’s shipments a good leading indicator for the health of global trade.

Automobile shipments rose 24.8 per cent from a year earlier in January in the 19th consecutive month of growth, the customs office said. Exports of general machinery, consumer appliances and computers all grew by a double-digit pace.

South Korea’s exports emerged from a year-long slump late last year, helping the economy expand at a steady pace of 0.6 per cent in the last three months of the year. The rebound partly offset the negative impact of credit risks surrounding the construction industry, facilitating growth in line with the central bank’s expectations.

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How long and fast South Korea’s exports will recover this year will depend on a combination of factors, including consumer demand in major countries from the US to China and the trajectory of interest rates around the world.

China’s factory activity contracted again in January, with the official manufacturing purchasing managers index reading 49.2. The US and Chinese economies are both expected to slow this year, according to consensus forecasts.

“Higher interest rates may continue to limit consumer spending on goods and borrowing costs for businesses, and uncertainty remains around the extent to which Chinese demand, which is key to supporting intra-Asia trade, accelerates,” Shanella Rajanayagam and Prachi Mathur at HSBC Global Research said in a note this month. “Businesses are navigating a highly uncertain trade environment.”

South Korea has prided itself on being among the most agile in adapting to changing trade landscapes and is on alert for any impacts stemming from persistent geopolitical flashpoints, including conflicts in the Middle East. A series of elections scheduled across dozens of nations this year also will add to policy uncertainties for global trade.