The 'economic canary in the coal mine' offers no reason for optimism

There continues to be little doubt that the global economy is slowing.

South Korean exports - also referred to as the world's economic "canary in the coal mine" - fell 4.7% in November from a year earlier.

While this overall number wasn't as bad as the 9.0% plunge expected by economists, the economists argue that a truer picture can be seen in the details.

"On closer inspection, however, we see no reason for optimism," Barclays' Wai Ho Leong and Angela Hsieh said.

Why Korean exports matter

Economists look to Korean exports because they are the world's imports. Major traded goods are as varied as automobiles, petrochemicals, and electronics such as PCs and mobile devices. Because this report is the first monthly set of hard economic numbers - as opposed to soft-sentiment-based reports like purchasing managers surveys - from a major economy, economists across Wall Street dub South Korean exports as the global economic "canary in the coal mine."

The underlying decline was closer to 8.9%

Among Korea's major industries is the manufacturing of shipping vessels, which accounted for a whopping $2.19 billion dollars of the country's $44.4 billion worth of exported goods.

"The main lift [in exports] was a 133% year-on-year surge in vessel deliveries, which came in the last 10 days of November (vessel shipments in the first 20 days were at 29.5%)," Leong and Hsieh observed. "Excluding vessels, exports actually fell 8.9% m/m sa (October: -3.0%; Sep: +5.7%), a sign of deepening export compression."

Barclays attributed the gain in vessels to the delivery of deep water floating oil and gas platforms, which they estimate to run about $1 billion to $4 billion per unit. They speculate the order could have been made by a company in Europe, where exports bound for the country jumped 9.3% during the month.

Going back to the core goods, the message was not good. Exports to China fell 2.6%, even as exports were bolstered by China's record Singles' Day shopping event; popular items for Chinese shoppers include Korean-made cosmetics, household appliances and clothes.

Exports to the US fell 9.2%.

"There were no discernible signs of further orders for the Christmas festive period," the analysts noted.

So, there's not much optimism here.