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We’re hearing more and more about how South Korean is one of the most important — if not THE most important — economic indicator in the world.Much of this has to do with its high correlation to most of the Asian economies.
From Jim O’Neill, Chairman of Goldman Sachs Asset Management:
There are some indicators which are simply more powerful in their reliability than others, as well as having predictability in shores beyond their own. In my view, the Korean trade data, US job claims, the US ISM report and its new orders and inventory component, the Euro area business and consumer confidence surveys, especially the German IFO, are the key numbers I look for each month.
This morning, we heard two top strategist refer to the measure as a “canary in the coalmine.”
From Goldman Sachs via FT Alphaville:
South Korea then is the “canary in the coalmine”, according to Goldman Sachs, because it not only publishes data earliest, but has a high correlation to the export growth of other Asian countries:
The data passes causality tests for contemporaneous exports of China, Japan, Australia and India as well as the US and the Euro Area (see Exhibit 3). They also pass the causality tests for exports of Hong Kong, Malaysia, Philippines, Singapore and Thailand.
As we reported on Monday, the bad news is that Korean trade data has deteriorated. South Korean exports and imports both fell unexpectedly in April.
But this isn’t necessarily bad news. Rather, it may be reflecting secular changes in the Asian economy.
Here’s Ed Yardeni of Yardeni Research: