Machinery Drives Export | Korean Products

October 18, 2018

Even though two main export items are excluded, it is possible to maintain upbeat due to construction machinery which is proving to be competitive.

When we worry about the Korean economy, the words not removed at all are ‘the phenomenon of semiconductors’ sole lead.’ However, exports of May relieved such worries. Export growth rate increased by 12.5% YoY excluding shipbuilding and semiconductors (Excluding these two items, daily average export increased by 10%.).
It is machinery that drives export expansion following semiconductors, chemicals and oil refining. Machinery exports in May increased by 15.8% YoY, marking double-digit growth for two consecutive months following April (13.1% YoY). In particular, construction machinery is proving to be outstanding.
Experts predict that construction machinery exports will expand continuously. There are three reasons for such expansion of export:s First, the home ownership rate in the USA has rebounded in almost a decade. The actual demand seems to increase mainly among people in their 20s and 30s. In this process, the speed of new home sales growth is faster than that of the existing ones.
In addition, it was confirmed at the beginning of the year that the growth of housing transaction volume rebounded in China. Although the liquidity growth rate in the market is falling, the real estate market is by contrast improving.
Also, construction machinery exports have become more diversified. Exports of construction machinery increased in India and Eastern Europe as well as the USA and China.
Although the export growth rate is expected to decline in July and September due to the base effect, the overall export trend is positive in the second half of the year. Daily average exports excluding shipbuilding are on the rise, and daily average exports excluding shipbuilding and semiconductors reached the top of the graph.
Mr. Ahn Ki-tae, a researcher of NH Investment & Securities, said, “Since Korea is not a country with strong brand power in the consumer goods sector like Switzerland, so it tends to benefit from massive orders in developed countries. The pattern is that the global order increases when the inventory of manufacturing industry in the USA decreases and, in that context, Korea’s exports increase with a time lag.”
According to his explanation, the inventory ratio (inventory-to-sales ratio) of the U.S. manufacturing industry increased in early 2014, and Korea’s exports declined from the end of the year. On the contrary, the inventory ratio of the U.S. manufacturing industry decreased in early 2016, and Korea’s exports increased from the end of the year. There was a time lag of about one year.
Researcher Ahn added, “As the inventory ratio of the U.S. manufacturing industry is still on a downward trend, I maintain a positive outlook on Korea’s exports.” | Blog Magazine of Korean products, brands and Goods

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