[Asia Economy Reporter Su-yeon Woo] The business sentiment of South Korean companies showed an upward trend for the second consecutive month. This improvement was largely influenced by the expectation of 'With Corona,' which significantly enhanced the sentiment of non-manufacturing sectors such as the service industry.
According to the Business Survey Index (BSI) conducted by the Korea Economic Research Institute on 600 major companies by sales revenue on the 29th, the comprehensive business BSI outlook for October was 103.4, exceeding the baseline (100) for two consecutive months. The index value rose by 2.8 points compared to the previous month (September, 100.6).
A BSI value above 100 is considered a positive business outlook, while below 100 indicates a negative outlook. The Korea Economic Research Institute analyzed that the favorable business sentiment in October was due to the improved sentiment in the non-manufacturing sector, driven by expectations of a phased return to normal life through 'With Corona.'
The outlook for October by sector recorded ▲domestic demand 107.9 ▲exports 100.8 ▲investment 100.3 ▲employment 100.6 ▲financial conditions 99.4 ▲profitability 98.9 ▲inventory 101.7. The institute stated that the domestic demand outlook rose by 7 points from the previous month (September 100.9) due to expectations of expanded vaccination rates and normalization of economic activities.
On the other hand, the financial conditions outlook fell short of the baseline due to concerns over future increases in corporate financing interest rates, and the profitability outlook was below the baseline due to worries about deteriorating profitability caused by rising prices of major raw materials. Additionally, the inventory outlook exceeding 100 was interpreted as reflecting excess export inventory caused by issues securing shipping vessels and containers.
The comprehensive business outlook for October by industry was 101.0 for manufacturing and 106.9 for non-manufacturing. Although manufacturing slightly exceeded the 100 baseline, concerns remain over the sluggishness of light industries (93.3), centered on textile, apparel, and leather footwear industries (63.6). The Korea Economic Research Institute noted that domestic companies operating locally, such as garment and footwear OEMs, are experiencing production disruptions due to Vietnam's stringent social distancing measures.
Meanwhile, the non-manufacturing sector improved from a deterioration to a positive outlook, rising 7.5 points from the previous month (September, 99.4). The institute analyzed that the easing of domestic social distancing measures led to a strong upturn in leisure, accommodation, and food service industries (125.0), driving the overall index increase for the sector.
Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, said, "Following the sharp increase in confirmed cases after the Chuseok holiday, the 'With Corona' plan may face setbacks, and with financial conditions and profitability not favorable, business sentiment could contract again at any time." He added, "The government should focus on expanding vaccinations and strengthening quarantine measures while preparing support policies to resolve management difficulties faced by companies."
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