The first may be last

If there is one pedigree South Korea holds over the rest of the world, it is that it is the country that releases trade data before everybody else does. The anxious mind would always have an eye on them, not necessarily to be kept abreast of how the Korean economy is doing but much rather to read the tea leaves. The pundits like to deduce from the Korean numbers what is going on with Asian and global trade as such.

And so, the MOTIE, the ministry for trade, industry and energy published September trade numbers on Monday. The country’s exports, and that’s the number everybody is so keen on knowing, were down by 5.9% year-on-year, which is obviously not great news. Exports have been disappointing all the way since 2012, when for the ensuing 2 years the numbers were mixed at best and from January 2015 have been outright negative.

August this year was the only exception to that sobering trend, and it was for that reason that hopes for September were flying high. On the contrary though, we seem to have resumed the lull that doesn’t exactly speak volumes about Korea’s once mighty export economy. In the past 20 out of 21 months the numbers dropped by between -3 and at the low almost -20% year-on-year.

For the full year of 2015 export volume declined by -8% to 2014, and in the first 9 months of total volume sank by -8.5% compared to January-September 2015. Imports fared even worse. In 2015, they were down by -16.8%, and in the first 9 months they dropped -10.7%. These are significant deteriorations, and it gives us a sense that not all is well in the world of trade.

When looked at exports to which country or continent, we should not be surprised. In September, Korea exported -9.1% year-on-year less to China, -6.1% less to the US, and a whopping -14.5% less to the EU. The US economy seems to be slow as we keep suspecting, but here we also have another example why Europe is the true sick man of global trade. Exports to Japan however increased by +6.1%

Korea is only the harbinger of things to come. Just last week the World Trade Organisation cut its forecast for global trade growth this year by 1/3, reflecting what is so arrestingly being displayed by the Korean numbers. The new figure of 1.7% trade growth, down from the previous estimate of 2.8%, is a testament for trade not outgrowing economic growth any longer. Over the long run, trade used to outgrow GDP by a factor of 1.5 times.

The recent positive signals for global trade, such as a very modest pick up logged in Q2, or the Baltic Dry index bouncing hard from its all-time lows this year, are nothing but mayflies. Also, the IMF came out overnight lowering growth forecasts for the US and what they still call rich countries. That and the undeniably rising wave of protectionism will make sure that trade numbers will remain disappointing.