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South Korea’s exports rose for the first time in more than a year on semiconductor sales, an increase that may be short-lived as the coronavirus outbreak takes its toll on world trade.

Exports increased 4.5% in February from a year earlier, the trade ministry said Sunday. Economists had forecast a 2.8% gain.

The actual flow of goods is likely worse than the headline figure suggests, skewed by the timing of the Lunar New Year holiday which added three business days to the month this year in many Asian economies, or roughly an 18% increase in work time compared with 2019. South Korea’s average daily shipments dropped 11.7% last month, the report showed. Activity in China’s manufacturing sector contracted sharply in February, data on Saturday showed.

Key Insights

President Moon Jae-in on Tuesday called for “extraordinary” steps to shield the economy against the virus epidemic, as the number of domestic cases spike. Finance Minister Hong Nam-ki said Friday the government is compiling an extra budget with more than $5.1 billion in spending aid.Analysts have slashed projections for the pace of the country’s growth and the Bank of Korea on Thursday said there’s now a chance of contraction in the first quarter.South Korea is an important bellwether of global tech demand because it’s the biggest producer of the memory chips in everything from computers to smartphones.“We’re now seeing tremendous short-term disruption from Korea to Thailand to Italy, as companies realize this isn’t only a China issue,” said Nick Vyas from the University of Southern California Marshall School of Business.

What Bloomberg’s Economist Says

“Looking ahead, weakened demand from China and disrupted supply chains will likely weigh on overseas sales for the next few months. Should the virus spread further and damp demand from other trade partners, exports would see more downside risk.”

--Justin Jimenez, economist

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Shipments to China dropped 6.6% in Feb. y/y; average daily exports plummeted 21%Chip exports increased 9.4% y/yExports to the U.S. rose 9.9% y/yImports rose 1.4% from a year earlier, resulting in a trade surplus of $4.1 billionAutomobile shipments decreased 17%, while exports of phones and other wireless communication devices rose 8%

(Updates with additional data in last section)

To contact the reporters on this story: Sam Kim in Seoul at skim609@bloomberg.net;Jihye Lee in Seoul at jlee2352@bloomberg.net