Encouraging signs in Korea

Korea looks to have contained its “second wave” of the virus with minimum cost to the economy. There were just 38 newly confirmed cases in Korea today, which was the lowest since early August and down from a peak of 441. With cases falling, the government has continued to ease restrictions and the high-frequency data suggest that mobility is improving. Meanwhile, data published today show the impact of the second outbreak on the economy has been smaller than we had initially feared. Although the hotel and restaurant sector has been hit hard – output was down 8% m/m in August – the overall service sector shrunk by just 1% last month. Consumer spending performed strongly - retail sales were by 3% m/m in August. Other sectors of the economy have been unaffected by the latest outbreak. Trade data for the first 20 days of September show that exports rebounded to pre-crisis levels for the first time. The resilience of the economy over the past couple of months means the risk to our forecast of a 2% contraction in GDP this year now lie to the upside.