October Manufacturing and Non-Manufacturing Business Conditions Rebound Simultaneously... Largest Increase in 11 Years

[Asia Economy Reporter Kim Eunbyeol] As the resurgence of the novel coronavirus infection (COVID-19) shows signs of slowing down, the business sentiment among companies has simultaneously rebounded.

According to the 'October 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 rose by 10 points from the previous month to 74 points. The BSI for all industries had been steadily recovering since April (51), but fell by 2 points in September, making this a rebound after one month.

The BSI is a statistic that surveys business owners' judgments and outlooks on the current business situation; 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 enterprises (1,662 manufacturing and 1,161 non-manufacturing).

Both manufacturing and non-manufacturing BSI rose simultaneously. The manufacturing BSI in October recorded 79, up 11 points from the previous month. The increase in the BSI for all industries and manufacturing is the largest since April 2009 (an 11-point increase) right after the financial crisis.

The manufacturing BSI rose mainly in automobiles (35 points), chemicals and chemical products (11 points), and electronic, video, and communication equipment (6 points). Kim Daejin, head of the corporate statistics team at the Bank of Korea, explained, "As manufacturing operating rates increased, domestic sales of automobile and semiconductor-related electronic parts also rose." Chemical products were also affected by an improved spread.

Among manufacturing, the large enterprises' BSI (81) rose by 6 points, and the small and medium enterprises' BSI (76) rose by 18 points. The small and medium enterprises' BSI rose particularly due to the base effect from a significant drop last month. The increase in the small and medium enterprises' BSI is the largest since January 2003. By company type, export companies (82) and domestic companies (77) rose by 8 points and 14 points respectively. Specifically, sales BSI (78), profitability BSI (87), and financial condition BSI (84) all rose simultaneously.

The non-manufacturing BSI also recorded 69, up 7 points. This increase is the largest since December 2009 (7-point increase).

Meanwhile, the Economic Sentiment Index (ESI) for October, which reflects both the BSI and the Consumer Sentiment Index (CSI), recorded 85.9, up 12.7 points from the previous month. The increase in ESI is also the largest since April 2009 (18.8-point increase) right after the financial crisis. The cyclical component of the ESI, calculated by removing seasonal and irregular variations from the original series, was 78.0, up 2.7 points from the previous month.