HERE COMES THE GLOBAL ECONOMIC CANARY IN THE COALMINE...

south korea trade

It’s a silly nickname, but a fitting one.

At 8:00 p.m. ET, we’ll get the June South Korean trade data.

We’re particularly interested in the export component, as it is considered a good indicator of the economy.

Economists are looking for a modest 0.1% year-over-year increase.

Economists across Wall Street dub South Korean exports as the global economic canary in the coal mine.

Korean trade data usually comes before the first trading session of the month in Asia, which makes it the first of the world’s major economic indicators to be released.

Since the yen-devaluing era of Abenomics began, Korean exports have been more volatile due to currency swings.

Here’s a full preview from Societe Generale:

Thanks to strong gains in exports and very weak imports, South Korea’s trade surplus jumped to a 30-month high in May. We doubt that either will have been sustained to the same extent in June, and we expect slightly weaker exports and stronger imports. The latter is likely to have been supported by slightly higher oil prices, and more generally by a sense that the outright declines in imports over recent months are weaker than underlying domestic demand growth. Consequently, we expect a bit of a rebound, amplified in terms of year-on-year growth by a base effect. Meanwhile, exports will find it difficult to maintain their recent strength in our view. Growth in exports to China hit an 18-month high in May (12.7% yoy), but with China’s growth not appearing to have strengthened – if anything it appears to be slowing down – downside risks are loom there. That said, there appears to be scope for growth in exports to the strengthening US. However, the US share in Korean exports is less than half that of China. More broadly, the shift in the exchange rate to the yen over the past year or so also suggests that Korea is likely to lose some market share over time, capping growth in exports. On balance, we expect a trade surplus of around $4.9bn in June, which would be very close to the June 2012 surplus.

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