Friday, May 4, 2012

The world is a tangled web

Everything is interconnected. Even stuff that may appear to be insignificant may actually turn out to be the most relevant thing to look at. Look at the South Korean trade data for instance. You may wonder how the trade of a small Asian country affects the world's economics. For such skeptical thinkers, it is time to be shocked. As per Goldman Sachs, it is one of the key indicators of global economic health.

How? Well, South Korea is one of the largest exporters of capital goods to China. And we all know that the capital investment in China is what has been driving the demand for commodities and industrials. So if South Korean trade shows a slowdown, like it has in recent times, then it indicates that capital investment in China has slowed down.

This in turn translates to a lower demand for commodities from the dragon nation. So for all those countries that have been depending on demand from China for their intermediate goods, they are most likely to see a slowdown in coming months. Therefore, the trade data of South Korea is actually a very important indicator of global economic health.

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