South Korea’s current-account surplus widened to a record in March as imports fell and the slump in exports eased.
The news to an extent followed similar reports for March from China and Japan where the sharp rate of fall in exports eased, but the rate of fall in imports continued.
It’s the continuing sharp fall in imports that tells us the major economies of the region are under pressure, even if many commentators believe China is now starting to grow.
South Korea’s trade surplus expanded to $US6.65 billion from $US3.56 billion in February, according to figures from the central bank, the Bank of Korea.
That is similar to the experience in china in March, but not in Japan, where the country incurred its first trade deficit for a financial year for 28 years in the year to March. The country had a small ($US111 million) trade surplus in the month of March.
In South Korea the improving outlook (the economy grew by an estimated 0.1% in the March quarter, against a 5.1% plunge in the December quarter) has seen the country’s currency, the won rise 17% since mid March, and a big turnaround from 2008’s weakness and from the 11 year low reached March 11.
There are now clear signs the government’s $US37 billion stimulus has steadied the sharp drop seen late last year.
Across Asia, there are signs the region’s export slump may be abating, buoyed by stronger demand from China. In fact Goldman Sachs, UBS AG, Deutsche Bank and Citigroup have all raised their 2009 growth estimates for South Korea in the past week.
The turnaround comes despite poor results for steel companies like Posco and Hyundai Steel, lower earnings for a host of chip makers, electronics groups and ship builders.
The Bank of Korea reckons South Korea will post an $US18 billion current-account surplus in 2009, up from a $US6.4 billion deficit in 2009. But that will be more from a slump in oil and oil product costs and a sharp fall in the price and volume of other exports, such as iron ore and coking coal from Australia.
Factory output rose 6.8% in February from January. South Korean consumer confidence in April climbed to the highest level in at least nine months.
The trade surplus of $US6.98 billion in march was up from the $US3.11 billion surplus in February.
But exports on a customs-cleared basis, which exclude ships, dropped 22% to $US28.1 billion from a year earlier, and imports fell 36% to $US23.8 billion.
On free-on-board basis, which excludes freight and insurance costs, exports dropped 17.8% from a year earlier in March, slower than the 19.4% fall in February.
Imports on an FOB basis, plunged 35.8% last month, a bigger fall than the 30.6% fall in February, and a better indication of the deep recession gripping the South Korean economy.
The Bank of Korea said the income and services accounts worsened in the month but the capital account which measures of total inflows and outflows of international investment, recorded a deficit of $US2.18 billion in March, down from February’s $US2.98 billion deficit in February.
Meanwhile Japanese retail sales fell for the seventh straight month in March.
Overall retail sales in March fell 3.9% compared with March 2008, but those at large retailers, such as department stores, fell a nasty 8.1%.
Japan’s Ministry of Economy, Trade and Industry said sales at wholesalers fell a record 29.2% year-on-year, mainly due to the plunge in exports of steel, machine tools and other products.
The report showed sales of a wide variety of goods decreased: Clothing sales fell 5.9%, cars by 6.3%, machinery and appliances by 2.1%, and fuel-related products by 16.4%.
Figures out today and tomorrow will report on industrial production, unemployment and consumer price inflation in Japan.
The retail sales figures tell us that deflation is now stalking the country.
