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Strong Performance Expected in Third Quarter
The Korea International Trade Association expects another strong quarter based on its export business survey index
Strong Performance Expected in Third Quarter
  • By matthew
  • August 2, 2010, 16:17
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In a survey of 997 exporters conducted by the Institute for International Trade (IIE, President Lee Kyung-tae) under the Korea International Trade Association (KITA), the Export Business Survey Index (EBSI) marked 116.5 points, meaning that exporters expect a strong performance in the third quarter. The index has recorded above 100 for the last five consecutive quarters, but fell 11.9 points from last quarter’s 128.4 points. An EBSI above 100 means that more exporters expect the upcoming quarter to be stronger than do not.

The EBSI moves between 0 and 200, with a balance struck at 100 when positive views equal negative ones. If positive outlooks for the next quarter outweigh negative views, the figure moves towards 200 and vice versa

According to the survey, exporters plan to expand export consultations and contracts as well as increase the capacity usage ratio. However, they are concerned about the escalating cost of raw materials and lowered profitability brought about by greater fluctuation in the exchange rate and cost of raw materials.

With most export items expected to stay strong, home appliances (140.0), machinery (130.4), electronics (117.4) mobile phones and parts (146.7) are expected to make significant improvements compared to the second quarter. Such improvements seem to be bolstered by an economic recovery in emerging economies and the United States, as well as the resultant increase in demand for IT home appliances. Oil products which showed a weak performance in the second quarter are also expected to rebound thanks to rising raw material costs.

Domestic exporters cited greater volatility in the won-dollar exchange rate (24.1%), a rise in raw material costs (24.0%) and their counterparts’ sluggish economies (15.6) as their biggest concerns for the next quarter.

“Although the overall outlook for the upcoming quarter is positive, concerns are growing over the increasing fluctuation in the exchange rate and raw material costs due to the recent financial crisis in Southern Europe,” said a source from the IIE.

“The export industry and the government will have to keep a close eye on the economic trends at home and abroad, as a weakening won and rising raw material costs are expected,” he added.

KITA has released the EBSI to provide objective data on the outlook for export consultations, manufacturing costs, profitability and export conditions so as to help exporters draw up rational management plans, while the government established an export policy. Surveyed companies are KITA members that recorded over US$ 500,000 in exports the previous year.