[Asia Economy Reporter Jeong Hyunjin] As the supply shortages of major raw materials and semiconductor components are expected to prolong, the proportion of domestic companies expecting an improvement in the economy has further decreased. The manufacturing sector showed a decline for the fourth consecutive month.
On the 25th, the Korea Economic Research Institute under the Federation of Korean Industries conducted a Business Survey Index (BSI) survey targeting the top 600 companies by sales. The comprehensive economic BSI outlook for July recorded 102.3. A BSI above the baseline of 100 indicates that positive responses outnumber negative ones.
The BSI outlook has maintained a positive forecast by exceeding 100 since March, but the proportion of companies anticipating economic improvement has gradually decreased. The July BSI outlook fell by 0.3 points compared to June’s outlook, narrowing the gap from the 5.1-point decrease seen previously. The June comprehensive economic performance index recorded 106.2, down 0.2 points from the previous month.
By sector, the July outlook was ▲domestic demand 100.0 ▲exports 100.3 ▲investment 102.3 ▲employment 105.7 ▲financial conditions 101.8 ▲profitability 99.7 ▲inventory 99.2. Investment and employment showed a predominance of positive forecasts, but domestic demand has steadily weakened since March, and profitability continued to show negative forecasts following June (99.0). The Korea Economic Research Institute stated, "In the current situation of sustained international raw material price increases, companies are unable to fully pass on cost increases to sales prices due to concerns such as demand decline, so the trend of deteriorating profitability is expected to continue for the time being."
By industry, manufacturing recorded 100.9, down 4.2 points from the previous month, marking a decline for four consecutive months since March (114.0). The non-manufacturing outlook rose to 104.4, up 5.0 points from the previous month (99.4), turning positive.
Within manufacturing, the sectoral outlook showed domestic demand at 96.1, down 7.6 points from the previous month, and investment at 101.3, down 4.7 points. Employment was 101.8, down 3.3 points from the previous month. This indicates a slight contraction in positive trends across major sectors. Notably, domestic demand fell below the 100 mark again after surpassing it in March for the first time in four months.
The Korea Economic Research Institute analyzed that as the supply shortages of major raw materials and semiconductor components show signs of prolonging, uncertainty has expanded in manufacturing companies’ production and investment plans. Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, said, "Given the characteristics of the Korean economy, which has a high proportion of manufacturing such as semiconductors and automobiles, uncertainty in the manufacturing economy can act as a downside factor for the entire real economy," adding, "Government-level measures are required to overcome the supply disruptions of raw materials and components."
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