SEOUL (Reuters) - South Korean exports in March fell 1.4 percent from a year ago, missing a consensus forecast for a small gain and adding to questions about the strength of a global recovery even with a boost to shipments in the first month of a landmark free trade pact with the United States.
Shipments to the United States jumped nearly 28 percent thanks to the free trade agreement, but weak sales to the other big markets such as China and the European Union clouded prospects, data published on Sunday showed.
The median forecast from a Reuters survey of 14 economists was for exports to expand by 0.7 percent in March from a year earlier. Forecasts ranged from a fall of 5.1 percent to a rise of 8.3 percent.
“Exports will remain weak at least through the second quarter, although there won’t be a collapsing pattern in exports because we see some signs of bottoming in the Chinese economy and in the euro-zone crisis,” said Lee Sang-jae, economist at Hyundai Securities.
Exports reached $47.36 billion in March while imports fell 1.2 percent to $45.03 billion, producing a surplus of $2.33 billion. The trade balance had swung to a surplus of $1.52 billion in February from a $2.23 billion deficit in January.
Exports to China, South Korea’s biggest market taking in about one-quarter of shipments, rose just 0.7 percent in March over a year ago while exports to the European Union plunged 20.3 percent, the Ministry of Knowledge Economy said.
Shipments to the United States jumped 27.9 percent as a free trade agreement removed import tariffs on many items from the middle of March when it took effect. The EU and the U.S. each buy about 10 percent of South Korea’s exports.
Lee said the weak overall exports despite a jump in sales to the U.S. showed the broad global demand remained depressed.
“The effect from the free trade agreement has been widely expected and the numbers in general show the world economy was not recovering fast just year, but the world economy is going through the bottom,” said Lee.
South Korea and the United States have said the controversial trade pact would boost exports for both countries by making their products more competitive.
The March data, which is provisional and may be revised later in the month, brought the country’s exports for the first quarter to $134.96 billion, up 3.0 percent from a year earlier.
Export growth from South Korea, Asia’s fourth-largest economy, slowed sharply to an annual 9.0 percent in the final quarter of 2011 from 21.4 percent in the third quarter as the European debt crisis hit demand.
The government has forecast exports in the whole of this year would suffer from the slow recovery in the U.S. and the euro zone crisis, growing about 7 percent after a 19 percent gain in 2011 and 28 percent in 2010.
Although private consumption generates slightly more than half of South Korea’s annual gross domestic product, exports remain a driver of growth as heavy household debt and slow job growth keep weighing down consumer spending.
Editing by Ed Lane