South Korea's exports maintained strong momentum in July, with growth easing from June's peak but significantly surpassing market forecasts. Semiconductors continued to serve as the primary driver, providing robust support for the economy and reinforcing the case for the central bank to tighten monetary policy further.
According to preliminary data released by the Ministry of Trade, Industry and Energy on Saturday, July exports rose 62.8% year-on-year to $98.9 billion. This was lower than the revised near-50-year high of 70.7% recorded in June but above the median forecast of 59.5% from a survey of 11 economists. On a working-day-adjusted basis, export growth reached 69.6%.
Imports grew 26.5% to $68.6 billion in the month, narrowing the trade surplus to $30.3 billion from June's revised $36.1 billion. In terms of total export value, the $98.9 billion figure was the second-highest monthly total ever for South Korea, trailing only June's record-breaking $102.2 billion.
Semiconductor exports surged 178.8% year-on-year to $41 billion, crossing the $40 billion threshold for the second consecutive month. This performance has prompted economists to raise their expectations for the Bank of Korea's rate-hiking path. According to reports, a majority of economists now anticipate another rate hike before October, with a minority suggesting it could come as early as the board meeting on August 27.
The robust chip demand propelled export volumes to another near-record high. July's export total of $98.9 billion stood as the second-highest in South Korean history, continuing the momentum from June's historic breakthrough. Excluding semiconductors, other categories collectively grew about 26% year-on-year. Minister of Trade, Industry and Energy Kim Jung-kwan noted that 19 of South Korea's 20 major export categories posted positive year-on-year growth, indicating an increasingly diversified export structure.
Among other key export items, automobile exports rose 7% to $6.2 billion, driven by global demand for hybrid and other eco-friendly vehicles. Petroleum product exports increased 34.1% year-on-year to $5.7 billion, supported by higher oil prices. Petrochemical exports grew 10.3% to $4.2 billion, while mobile device exports surged 51% to $1.8 billion, fueled by steady sales of premium smartphones like the Galaxy S26 series.
By destination, exports to China jumped 96.2% year-on-year to $21.7 billion, led by chips, non-ferrous metals, and petroleum products. Exports to the United States rose 68.7% to $17.4 billion, driven by AI data center investment projects from major tech companies. Exports to ASEAN countries increased 73.7% to $18.8 billion, while shipments to the European Union grew 55.7% to $9.4 billion.
Global AI infrastructure investment continued to fuel a severe shortage of memory chips, with supply growth falling far behind demand expansion. Samsung Electronics stated last Thursday that it expects semiconductor shortages to persist until 2028. Samsung's April-to-June earnings report showed a 14-fold surge in quarterly net profit year-on-year, with both revenue and operating profit hitting record highs.
SK Hynix also posted a 13-fold jump in net profit year-on-year during the same period, reaching a historic peak, with revenue and operating profit also setting records. Strong demand came primarily from high-end chips. Both companies maintained an optimistic outlook for the remainder of the year. Computer-related product exports soared 404% year-on-year, further underscoring the broad impact of AI-related demand.
The trade data provided fresh support for the Bank of Korea's monetary policy stance. The central bank raised its benchmark interest rate by 25 basis points to 2.75% last month, its first rate hike since early 2023. Governor Shin Hyun Song later stated that policymakers still see a need for further rate increases, though the timing and pace would depend on inflation, economic growth, and financial stability.
On inflation, the consumer price index rose 3.2% year-on-year in July, with core inflation holding at 2.5%, suggesting persistent underlying price pressures. On growth, the economy expanded 0.6% quarter-on-quarter in the second quarter, beating economists' expectations. The government projects full-year economic growth of 3% this year, higher than both the central bank's and the International Monetary Fund's forecasts. Shin said the central bank's May forecast of 2.6% growth now appears clearly too low and will be "substantially" revised upward in August, citing stronger-than-expected exports, investment, and consumption.
Despite the positive July data, external risks to South Korea's trade have not dissipated. Kim stated in a release that rising protectionism in major economies and ongoing geopolitical tensions in the Middle East are key headwinds for South Korean exports.
He added that the government will closely monitor market trends for major export items and deploy various policy tools to help South Korean companies navigate changes in the global trade environment, including tariff and non-tariff barriers.
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