Korea’s Early Exports Jump as Demand Resilient Amid Delta

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South Korea’s early trade data show exports are set to rise in August, suggesting global demand remains resilient in the face of a surge in cases of the delta variant. 

Overseas shipments rose 40.9% in the first 20 days of the month from a year earlier, the customs office said Monday. Exports to major trade partners all posted strong gains. Those to the U.S. were up by 50% and shipments to China, where new outbreaks emerged mid-July, still jumped by more than a third. 

The report shows renewed restrictions to curb infections are yet to derail a recovery in global trade. Still, concerns are growing over the outlook as the more contagious virus strain rages across countries, denting optimism that prevailed earlier this year. 

Signs of trade disruptions from the delta variant have already emerged, as a port in China was partially shut after a worker became infected. Activity also slowed in China, Korea’s biggest trade partner, due to tough restrictions.

Vietnam, a major destination for Korean investment and a key supplier in the global manufacturing chain, saw outbreaks causing factory shutdowns. A less upbeat outlook for memory-chips, a key export, is also a risk for Korea.

“How Covid spreads in China and Vietnam will be a key risk that could buffet Asia’s exports over the longer term,” said Park Sang-hyun, an economist at HI Investment & Securities. “The pace of growth in Korean exports will inevitably slow as base effects weaken, but with investment strong in the U.S., it should stay around 20% this quarter.”

Korea’s trade data are an early indicator of global economic activity as its manufacturers are positioned widely across supply chains. The country expects record exports this year to boost overall economic growth to around 4%. The Bank of Korea will be assessing the latest trade data as it weighs whether to increase rates at the Aug. 26 meeting.

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Korea’s overall imports surged 52.1% in the first 20 days of August. Gains were largest in commodity-related items such as oil products, crude and gas, likely reflecting year-on-year price changes. 

While the headline export figure was partly lifted by a 7.5% fall in the same period last year, other indicators also point to resilience. The value of daily shipments during Aug. 1-20 was $2.15 billion, up 31.5% from a year ago and also higher than in the previous two months. 

Total exports to the European Union rose 42.7%, while those to Japan increased 49%. 

Overall semiconductor shipments increased almost 40%. Exports of cars rose 37%, while those for oil products and steel items were both up by more than 50%. 

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