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S.Korea exports extend double-digit growth; Delta variant, China demand pose risks

SEOUL, July 1 (Reuters) – South Korean exports marked a fourth consecutive month of double-digit growth in June, albeit at a reduced pace, propelled by solid economic recovery in major markets globally and continued strong demand for memory chips and automobiles.

Exports surged 39.7% in June versus the same month a year earlier, reaching the third-biggest value on record at $54.80 billion, trade ministry data showed on Thursday. That beat the 33.6% average of 17 economist estimates in a Reuters poll, and marked the eighth consecutive month of expansion.

Exports grew 45.6% in May, the sharpest increase since August 1988.

“As base effect (from the coronavirus) fades, the growth rate itself probably reached the peak in May … but the exports value will likely continue growing in the third quarter,” said Park Sang-hyun, chief economist at Hi Investment & Securities.

“We expected weakened Chinese demand due to shipping delays and supply-chain disruptions but the impact is seen limited, with exports to other ASEAN economies improving.”

The nation’s monthly trade data is a closely watched as it is the first to be released among major exporting economies and so widely considered a bellwether for global trade.

Overseas sales of semiconductors, the country’s top export, grew for the 12th month in a row, by 34.4%, while those of cars and petrochemical products surged 62.5% and 68.5% respectively.

By destination, exports to China, the United States and the European Union soared 14.3% and 51.9% and 65.3%, while those to South Korea’s six other major trading partners also increased.

Fresh risks to exports are the spread of the coronavirus Delta variant and worries about slowing Chinese economic recovery, economists said.

“Exports to China may fall to single-digit growth as China’s June manufacturing PMI (purchasing managers index) signalled weakening recovery momentum… Delta virus and related lockdown measures are also a potential risk to exports,” Park said.

Data on Wednesday showed growth in Chinese factory activity slowed in June to a four-month low on higher raw material costs, a shortage of semiconductors and a COVID-19 outbreak in major export province Guangdong, amid wider supply chain disruption in Asia.

Meanwhile, South Korean trade data on Thursday also showed imports grew 40.7% in June, beating forecasts for a 33.0% jump. The trade surplus stood at $4.44 billion, versus $2.94 billion a month prior.

Earlier this week, the finance ministry sharply upgraded its 2021 growth forecast to an 11-year high of 4.2%, with an 18.5% jump in exports towing the expansion.

Reporting by Joori Roh; Editing by Christopher Cushing

Our Standards: The Thomson Reuters Trust Principles.

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