21 MARCH 2024
Manufacturing and trade activity tend to be intrinsically linked because many of the goods produced in any given country are transported across international borders. This means trade data is still positively correlated to global growth, despite all the talk of deglobalisation.
The chart below shows the annual rate of South Korean export growth, going back 20 years. It also highlights the two official US recessions during this period; 2008 and 2020. As you can see, some of the more extreme declines in South Korean trade have coincided with a major US downturn.
South Korean trade data is usually deemed a good barometer of the global trend because its economy is so open with exports often driving at least 40% of the country’s GDP. Furthermore, it trades in a wide variety of goods and industries so is deeply integrated into global supply chains, especially for advanced technological goods like semiconductors and other electronics.
Therefore, the recent pickup in South Korean export growth suggests global trade levels are improving which, in turn, reduces the risk of a major economic downturn. At least in the near-term.
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