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(Bloomberg) — South Korea’s exports extended their strong growth in July, reinforcing signs that artificial intelligence-driven demand continues to underpin the economy and strengthen the case for further monetary tightening.
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Exports adjusted for working-day differences climbed 69.6% last month from a year earlier, the Ministry of Trade, Industry and Energy said Saturday. Imports increased 26.5%, resulting in a trade surplus of $30.3 billion. On an unadjusted basis, shipments rose 62.8%, compared with a revised 70.7% gain for the full month of June.
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Semiconductors again drove gains, supported by continued investment in AI and data centers. Chip exports surged 178.8% from a year earlier, while shipments of computer-related products gained 404%.
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The data suggest external demand remains resilient even as higher energy prices and geopolitical tensions continue to weigh on other industries. That provides fresh support for the Bank of Korea’s view that economic momentum is strong enough to withstand increased borrowing costs.
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The figures also support the BOK’s decision last month to raise its benchmark interest rate by 25 basis points to 2.75%, its first increase since early 2023. A recent survey of economists showed they expect another move by October, with a minority predicting it could happen at the Aug. 27 board meeting.
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Governor Shin Hyun Song has since said policymakers still see a need for further rate increases, although the timing and pace will depend on inflation, economic growth and financial stability.
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Consumer inflation accelerated 3.2% last month from a year earlier, while core inflation held at 2.5%, suggesting underlying price pressures remain persistent. Meanwhile, the economy expanded 0.6% in the second quarter from the previous three months, beating economists’ expectations.
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The government expects the economy to expand 3% this year, outpacing forecasts by both the BOK and the International Monetary Fund as AI-related investments continue to boost exports and domestic demand.
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Shin said the bank’s May projection of 2.6% growth this year now appears too low and would be revised up “substantially” in August, citing stronger-than-expected exports, investment and consumption.
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Exports to China increased 96.2%, while shipments to the US rose 68.7%, and those to the European Union and the ASEAN region remained strong, reflecting sustained demand for semiconductors and other AI-related products.
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(Updates with new attribution in second paragraph, export details in third, destinations in 10th.)
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