South Korea’s exports unexpectedly increased in May as surging smartphone shipments and improving demand from the U.S. and China countered a decline in the yen.
Overseas shipments increased 3.2 percent from a year earlier after a 0.4 percent gain in April, the Ministry of Trade, Industry and Energy said in a statement today. The median estimate in a Bloomberg News survey of 12 economists was for a decline of 0.9 percent, with 10 projecting a drop.
Today’s report signals South Korea is weathering an 18 percent decline in the yen against the dollar over the past six months amid government warnings the drop is hurting car and electronics exporters. Finance Minister Hyun Oh Seok reiterated yesterday that the yen’s depreciation is having “negative impact” on Asia’s fourth-largest economy.
“The impact of a falling yen doesn’t seem to have bitten the entire economy but this is clearly a major risk, along with a slow global economic recovery,” said Park Sang Hyun, a Seoul-based economist at Hi Investment and Securities Co. “The Bank of Korea will keep interest rates low and may cut again if the yen sees further sharp declines.”
Policy makers in South Korea have stepped up efforts to boost the economy with fiscal stimulus and monetary easing while giving financial support for exporters to cope with a weaker yen. Overseas shipments account for about half the economy.
“Smartphone sales are pretty strong and demand in the U.S. and China is picking up,” the trade ministry said in a statement today. “Still, the weak yen is a big concern and our exports will deteriorate if the yen’s depreciation is prolonged and deepens.”
Overseas sales of wireless telecommunication devices jumped 62.5 percent in May from a year ago, according to the statement. By destination, exports to the U.S. rose 21.6 percent and those to China gained 16.6 percent. Shipments to Japan fell 11.7 percent.
Imports declined 4.8 percent from a year earlier in May, the ministry said today, the fourth straight decline. The trade surplus was $6 billion, the most since October 2010, after a $2.4 billion excess in April.