The world’s economic canary in the coal mine has flopped again.
South Korean exports fell by 6.0% in May from a year earlier, according to Korea’s latest export data.
This is the 17th consecutive month in which exports have dropped.
And while the data was an improvement from the 11.2% year-over-year drop in April, it was far worse than the 0.4% dip economists were expecting.
Korean exportsare often referred to as the world’s economic canary in the coal mine, or a preview of what’s to come, by economists both because of their heavy exposure to the US, China, and Japan, some of the world’s biggest economies, and because the data comes out on the first day of each month.
As such, they generally give a good taste of what has been happening in global trade activity in the month prior.
Notably, a Morgan Stanley team led by Deyi Tan argued that the latest reading on Korean exports actually “saw some signs of stabilization in May at low levels, suggesting similar read-across for global trade activity.”
- Morgan Stanley
Last month, Deutsche Bank senior economist Juliana Lee argued that South Korean exports faced two major long-term problems: China’s rise in industrial sophistication and increasing labor costs combined with falling export prices.
“Needless to say, the combination of falling earnings and rising input costs bodes ill for Korea’s manufacturing – it is simply unsustainable, especially given China’s rising industrial sophistication,” she wrote in a note to clients.
“They clearly point to Korea’s need to improve its economic flexibility/adaptability to a changing global environment, to avoid a rather disruptive consolidation.”