Corporate Sentiment Drops in September for the First Time in 5 Months Amid COVID Resurgence

[Asia Economy Reporter Kim Eunbyeol] As the novel coronavirus infection (COVID-19) resurges domestically, the business sentiment among companies has declined for the first time in five months. The business conditions felt by non-manufacturing companies were particularly sluggish.

According to the 'September Business Survey Index (BSI) and Economic Sentiment Index (ESI)' released by the Bank of Korea on the 29th, the BSI for all industries this month was 64, down 2 points from the previous month. After steadily recovering since April (51), the BSI fell for the first time in five months.

The BSI is a statistic that surveys entrepreneurs' judgments and outlooks on current business conditions; if negative responses outnumber positive ones, the index falls below 100. This month's survey was conducted from the 14th to the 21st, targeting 3,255 corporate entities (1,637 manufacturing and 1,150 non-manufacturing companies).

While the manufacturing industry's BSI generally continued its recovery trend, the non-manufacturing BSI, which includes many face-to-face sectors, was particularly weak due to the domestic spread of COVID-19. The non-manufacturing BSI for September was 62, down 4 points from the previous month, marking a decline for the first time in five months.

The decline was centered around information and communication industries (-13 points), business facilities, business support and rental services (-9 points), and wholesale and retail trade (-4 points). The non-manufacturing industry's BSI for next month's business outlook (62) also fell 7 points compared to the previous month.

The manufacturing industry's BSI was 68, up 2 points from the previous month, and the next month's business outlook BSI (68) remained the same as the previous month. By company size, the manufacturing BSI rose for large enterprises (+5 points) but fell for small and medium enterprises (-4 points). By company type, both export companies (+2 points) and domestic companies (+1 point) saw increases.

Among detailed sectors, the manufacturing industry's primary metals (+14 points), chemical substances and products (+6 points), and other machinery and equipment (+3 points) showed clear improvements in business sentiment. The Bank of Korea analyzed this as influenced by the recovery of steel product prices, the decline in crude oil prices, and an increase in industrial equipment sales.

Kim Daejin, head of the Bank of Korea's Corporate Statistics Team, explained, "The decline in BSI was mainly led by wholesale and retail trade, which rely heavily on face-to-face services," adding, "It appears that non-manufacturing sectors were significantly affected by the resurgence of COVID-19."

Meanwhile, the Economic Sentiment Index (ESI) for September, which incorporates the Consumer Sentiment Index (CSI) into the BSI, recorded 73.2, down 6.5 points from the previous month. The cyclical component of the ESI, calculated by removing seasonal and irregular fluctuations from the original series, was 70.9, up 0.9 points from the previous month.