One of the more reliable indicators of the global economy continues to confirm fears of a worldwide slowdown.
South Korean exports — also referred to as the world’s economic canary in the coal mine — fell 13.8% in December from a year earlier.
This was a deterioration from the 4.8% decline in November, and it was much worse than the 11.7% decline expected by economists.
Korea’s exports generally reveal more about the country’s global trading partners than it does about what’s happening internally.
“By destination, exports to all major markets fell,” Barclays’ Wai Ho Leong and Angela Hsieh observed. “All in, we think the underlying trend of a challenging external environment will likely extend into 2016.”
Why they call it the ‘canary in the coal mine’
Economists look to Korean exports because they are the world’s imports. Major traded goods are as varied as automobiles, petrochemicals, and electronics such as PCs and mobile devices.
Furthermore, this report is the first monthly set of hard economic numbers — as opposed to soft-sentiment-based reports like purchasing managers surveys — from a major economy.
So Korean exports have the potential to be a warning sign. Similarly, miners were believed to bring cage canaries down into the mines with them to monitor for noxious gases. Should the levels of noxious gases like carbon monoxide rise, the canary would die, signalling to the miners that it was time to get out.
In December, most major categories of goods saw declines, except for mobile devices which added 0.13 percentage points to the the aggregate exports number.
From a regional perspective, the declines were broad, with exports to the US, European Union, and Japan.
But the biggest source of weakness was China, which hacked 4.3 percentage points from exports.
This is in line with new data out of China, which confirmed that manufacturing in the world’s second-largest economy was still contracting. The Caixin-Markit manufacturing PMI unexpectedly fell to 48.2 in December from 48.6 in November. The official NBS manufacturing PMI stood at 49.7 in December. Any reading below 50 signals contraction.
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