February Manufacturing SMEs Sentiment Drops Sharply, Largest Decline in 11 Months

'February 2021 Business Survey Index (BSI) and Economic Sentiment Index (ESI)'

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] This month, the business sentiment perceived by manufacturing SMEs dropped the most sharply in 11 months since March last year. While the business sentiment of large corporations is improving as the recovery from COVID-19 gradually appears, the business conditions of SMEs have rather declined significantly.

According to the 'February 2021 Business Survey Index (BSI) and Economic Sentiment Index (ESI)' released by the Bank of Korea on the 23rd, the manufacturing business BSI this month was 82, down 3 points from the previous month.

In particular, when looking at the manufacturing business BSI by company size, large corporations recorded 93, up 2 points, whereas SMEs recorded 69, down 9 points compared to January. Previously, the largest drop in the SME business BSI was in March last year, when it fell 12 points to 46.

By company type, both export companies (-2 points) and domestic companies (-4 points) declined, recording 94 and 74 respectively.

Kim Dae-jin, head of the Corporate Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "The February manufacturing business BSI rose 11 points in chemicals and products but declined mainly in metal processing (-10 points) and electronic, video, and communication equipment (-5 points)." He added, "The rise in raw material prices, the slowdown in demand from upstream industries (construction), and the entry into the off-season for smartphones contributed to the sluggishness in industries such as electronics."

In a survey on management difficulties targeting manufacturers, the highest proportion was attributed to uncertain economic conditions (22.9%), followed by sluggish domestic demand (16.1%) and sluggish exports (10.2%). The proportion of sluggish domestic demand increased by 3.1 percentage points compared to the previous month, while the proportion of uncertain economic conditions decreased by 1.1 percentage points.

In the case of non-manufacturing industries, corporate sentiment improved. The non-manufacturing business BSI this month was 72, up 2 points from the previous month. Sales, profitability, and financial conditions BSI all rose simultaneously.

Although the corporate sentiment index shrank mainly among manufacturing SMEs this month, the encouraging point is that the business outlook BSI for next month improved. The March all-industry business outlook BSI rose 3 points to 78, and the manufacturing (4 points) and non-manufacturing (3 points) business outlook BSI also rose to 85 and 73, respectively.

The February Economic Sentiment Index (ESI) recorded 96.6, up 3.5 points from the previous month, and the seasonally adjusted ESI cyclical component was 95.1, up 2.7 points from the previous month.