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Exports rosy but domestic demand remains weak

Despite optimism growing over South Korea’s exports outlook, buoyed by strong outbound shipments of auto and chip products, domestic demand continued to remain low this month, further weakening business confidence among local manufacturers, data and reports showed Tuesday.

According to data compiled by the Korea Customs Service, total outbound shipments reached $11.2 billion in the first 10 days of April, a 6.1 percent increase from a year ago.

(Yonhap)
(Yonhap)

Led by strong overseas sales of semiconductors and cars, outbound shipments by Asia’s fourth-largest economy continued its upward trend supported by recovering global trade and rising oil prices.

By category, exports of chips grew 51.9 percent on-year while automobiles saw a 23.2 percent surge.

By country, outbound shipments to Vietnam rose 50.8 percent, followed by those to Japan with a 24 percent increase. South Korean exports to China also remained strong with a 10 percent increase, despite Beijing taking apparent retaliatory actions against Korean companies over the deployment of an US anti-missile system here. Most of the overseas shipments to China faced limited impact from such actions as only 5 percent of the shipments were retail products. Exports to the US also rose 18 percent and 10 percent, the customs service added.

In contrast to the rosy prospects of overseas shipments, which accounts for about 40 percent of the nation’s gross domestic product, pessimism persists on domestic spending, the Korea Chamber of Commerce and Industry said in a separate report.

According to a survey conducted by the KCCI, some 2,200 manufacturing firms rated the business sentiment index at 89 in the second quarter, reflecting their negative perspective for the third quarter of the year.

The index is a barometer for businesses’ expectations toward both the exports and local market. If it is above 100, businesses are said to be expecting improved conditions in the future. The last time the index was rated above 100 was in the third quarter of 2014, it added.

The overall business sentiment index saw improvements from the previous quarter, as it surged 21 points, chiefly due to the positive outlook for exports, which rose from 82 to 103. The index for domestic demand, however, reached 87, still far lower than the export outlook.

The KCCI said in a statement that the improvement in exports seems to have less influence in stimulating domestic demand than in the past.

“It remains uncertain whether the warming mood from the (strong performance by) semiconductor and petroleum products would translate into the entire economy,” it said.

Cho Sung-hoon, an economics professor at Yonsei University, one of the advisory committee members of the KCCI, also warned that private spending will stay weak for a while due to structural problems such as an aging population, a high rate of household debts and slowing growth in real income.

Meanwhile, the South Korean government expressed confidence that the nation’s economy is showing some positive signs of recovery. The Finance Ministry said in its monthly assessment report called the “Green Book” that private consumption has already hit the bottom and has started to rebound.

Retail sales rose 3.2 percent in March from the previous month, while the amount of credit card use in the local market grew 13.7 percent, it said.

By Cho Chung-un (christory@heraldcorp.com)
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