South Korean exports contracted over 11% over the past year marking the second consecutive month at negative levels. Many view this economic data series as an early indicator of global trade. South Korea is an export powerhouse with trading relationships throughout the world and region, particularly China and Japan. What is critical in our view is how long this trend persists — the contraction in Korean trade could turn out to be intermittent, fluctuating with periods of expansion as was the case in 2012-2013, or it could signal a more prolonged contraction with recessionary conditions that occurred during several periods over the past 20 years. Chinese economic growth will be a key factor and some see reflationary monetary policies gaining traction later this year and it appears that purchasing managers indices may be stabilizing, albeit below expansionary levels.
