Slow Recovery of Export Volume Amid Ongoing Pandemic... Will It Recover Next Year?

Exports are on the rise... but export volume has been shrinking for 2 years
"If volume recovers, KOSPI's medium-term uptrend will be established"

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Although the export market continues to show favorable conditions, analysis indicates that this is entirely dependent on the rise in export unit prices. The recovery of export volume is still struggling to break free from sluggishness due to the COVID-19 pandemic and supply chain disruptions. It is expected that export volume must recover from next year for the KOSPI's medium-term upward trend to be maintained.

On the 28th, KTB Investment & Securities forecasted that if the favorable export market continues, it could support the sustained upward trend of the KOSPI. According to the Ministry of Trade, Industry and Energy's 'Export-Import Trends' data, the cumulative export amount up to last month this year recorded $523.2 billion (approximately 626 trillion KRW), a 25.9% increase compared to the same period last year. This already surpasses last year's annual export amount of $512.5 billion. It is the largest growth rate since the 28.3% increase in 2010, right after the global financial crisis.

However, this year's favorable export market is entirely reliant on the rise in unit prices. As of October, this year's export unit price rose by 28.8% compared to the same period last year, significantly exceeding the previous highest record of 16.3% increase set in 2010. On the other hand, export volume during the same period showed a negative growth of -2.3%, remaining sluggish. Seokhyun Park, head of the investment strategy team at KTB Investment & Securities, explained, "The global economic recovery, centered on the service sector, has not yet been on track due to the continued impact of the COVID-19 pandemic this year as well," adding, "Along with this, supply chain disruptions are also acting as obstacles to the recovery of export volume."

In 2022, it is expected that these uncertainties will be resolved, and for the first time, export volume, which had decreased for two consecutive years, will turn to an upward trend after three years. Park said, "If export volume recovers, even if the historically high export unit price growth rate slows down, a solid export market can be sustained," and forecasted, "Such an export market will serve as the foundation for maintaining the KOSPI's medium-term upward trend."

The global market's focus is expected to be on the results of the U.S. November employment data scheduled for next weekend. KTB Investment & Securities views that the speed of recovery in the employment market aligns with the U.S. Federal Reserve's (Fed) employment market outlook, which anticipates a return to pre-COVID-19 levels by next year. Park analyzed, "The year-on-year increase rate of average hourly wages in November is expected to be 5.0%, following 4.9% in October, indicating a continued upward trend," adding, "However, since the month-on-month increase rate change is only 0.1 percentage points, concerns about rising inflationary pressure due to the high wage growth rate will be somewhat alleviated."

This content was produced with the assistance of AI translation services.