Korea's Q4 export growth outlook expected to drop off

Despite three consecutive quarters of the export business survey index exceeding scores of 100, Korea’s fourth-quarter export growth is expected to drop off, according to a report from the Korea International Trade Association on Thursday.

The local trade agency announced that its export business survey index of 801 exporting companies hit 100.3 for the fourth quarter, a 16.3-point drop compared to this quarter’s 116.6 and a 5.7 slide from the second quarter’s 106.

Despite the slowdown, next quarter’s export outlook still shows signs of optimism, as the level is expected to again exceed the 100 benchmark. A reading above 100 means businesses anticipate positive improvements, while a reading below 100 expresses negative industry sentiments.

According to KITA, the lowered growth can be attributed to, among other issues, fewer working days in light of the upcoming extended Chuseok holiday.

“In addition to certain economic factors, the number of working days in the fourth quarter decreased by 6.5 days compared to the same period last year,” said the report.

The report stated the EBSI rating for the semiconductor industry scored 99.9, while the country’s struggling auto industry reported an export index of 97.5. According to the trade association, threats of rising protectionism among Korea’s major trading partners including the US and China have resulted in a relatively lackluster export outlook in these sectors.

KITA also attributed increased costs for raw materials as another contributing factor for the slump in export growth. The companies surveyed pointed out the 16.1 percent rise in raw material prices, including oil, copper and aluminum, as well as buyer price cut of 14.3 percent as reasons for exporting slumps.

Kim Gun-woo, a researcher at KITA’s Institute for International Trade, said, “While exports have been on the rise as the global economy has improved and semiconductors have recorded record-high exports, the continuing global protectionism on trade and the recent US Federal Reserve’s decision to shrink assets may hinder the growth of Korean exports.”

On the other side of the spectrum, the medical equipment machinery supply sectors expect positive fourth-quarter exports on the back of strong demand. Firms in the medical equipment scored an EBSI rating of 138.3, while household goods and the machinery supply industry rated at 124.5 and 121.4, respectively. The agricultural and fisheries industry reported a 119.1 point rating.

By Julie Jackson (juliejackson@heraldcorp.com)