S Korean exporters show more hints of slowdown in global demand

INVENTORIES at South Korea’s manufacturing giants are piling up as global demand deteriorates, signalling a potential slowdown in the export-driven economy.

Inventories at the nation’s 100 biggest firms by revenue surged to 300 trillion won (S$301 billion) as at Sep 29, from 193 trillion won a year ago – rising at the fastest pace in a decade, data compiled by Bloomberg based on company filings showed. Tech giant Samsung Electronics reported 52 trillion won worth of inventories, up 52 per cent from a year earlier, while steelmaker Posco Holdings’ inventories swelled to 17.9 trillion won from 11.4 trillion won a year ago.

Soaring stockpiles at South Korean manufacturers, whose exports are seen as a bellwether for global growth, come as central banks across the world raise interest rates to combat inflation. Suppliers are “feeling a burden” with rising inventories as consumption slows “faster than their expectations”, said Kim Hojung, an economist at Seoul-based Yuanta Securities Korea. 

The situation is likely to keep worsening. South Korean manufacturers expect inventories to rise 7.1 per cent next month from a year earlier, the fastest pace since the global financial crisis, a business sentiment index released Thursday by the central bank showed.

The overall business outlook for October is also cooling, falling to the lowest point since October 2020 when the global economy was still reeling from the first wave of the coronavirus pandemic. That coincides with deteriorating confidence in exports, with manufacturers’ outlook for shipments dropping at the fastest pace in 2 years for next month, according to the Bank of Korea.

“No one buys smartphones, PCs and laptops,” said Choi Kwangwook, the chief investment officer at J&J Investments. “Excessive rate hikes by central banks are pushing consumers to close their wallets.” BLOOMBERG