In the face of an overall decrease in trade outlook and a three-point contraction in air trade, South Korea’s ocean trade is set to buoy the country’s trade prospects over the next three months, according to data from the DHL Global Trade Barometer released by DHL, the world’s leading logistics company.
The DHL Global Trade Barometer, an early indicator of global trade developments calculated using artificial intelligence and big data analytics, revealed that South Korea’s trade outlook is set to decelerate to 45 points, below the threshold of 50 that indicates growth. Although air imports will be sustained by domestic demand for Temperature or Climate Controlled Goods, and Basic Raw Materials, air exports are expected to slow across all industries. The outlook is more positive for ocean shipments, however, where imports of Temperature or Climate Controlled Goods are forecasted to remain stable, while Industrial Raw Materials and Personal & Household Goods are expected to grow moderately.
“The results of this quarter’s index do not come as a surprise, especially in light of the current trade climate and the lowering of South Korea’s GDP forecast to 1.9% this year,” said SP Song, Managing Director, DHL Global Forwarding Korea. “However, losses in some industries like semiconductors and automotive manufacturing have been offset by strong gains in the trade outlook for household goods and raw materials. These upward trends reflect the government’s latest fiscal measures introduced to increase domestic spending in 2020 by as much as 8%, in order to drive job creation, improve welfare expansion, and invest in R&D in areas like artificial intelligence, 5G networks and bio-health services. Other than developing new growth drivers for Asia’s fourth-largest economy, the government is also renewing efforts to deepen economic ties with ASEAN countries.”
Forecast for South Korea consistent with stagnating world trade outlook
The Barometer’s results also suggest that world trade remains at a crossroads and will further lose momentum over the next two months, albeit at a slower pace compared to the previous quarter. The current decline is triggered solely by a drop in air trade, with global ocean trade outlook remaining stable. All seven nations surveyed reveal indexes below 50 points except for Japan and the UK, where the Barometer forecasts a positive growth momentum for the two economies at 53 points each. In the Global Trade Barometer methodology, an index value above 50 indicates positive growth, while values below 50 indicate contraction.
“Worldwide, trade conflicts continue to smoulder and geopolitical tensions are causing uncertainty. Against this backdrop, global trade continues to develop surprisingly well. Although the DHL Global Trade Barometer has further decreased — with an index value of 47 points –world trade is still closer to staying at its high level,” Tim Scharwath, CEO of DHL Global Forwarding, Freight, said. “This strengthens our conviction that globalization will go on and that logistics will remain its key enabler in the future.”
Impact of US-Chinese tensions reflected in their own results
The trade conflict between China and the US continues to simmer, resulting in an overall subdued trade mood, with US and China accounting for the most negative trade outlooks in September. It is expected that US trade will shrink further, remaining in negative territory with 45 points, despite having climbed a point since June.