Non-Manufacturing Business Sentiment Hits Highest in 11 Years and 5 Months Following Social Distancing Lift

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jung] Thanks to the lifting of social distancing measures, the non-manufacturing sector's business sentiment in May reached its highest level in 11 years and 5 months. However, the manufacturing sector's business conditions weakened compared to the previous month due to lockdowns caused by the spread of COVID-19 in China and the burden of raw material prices.

According to the Bank of Korea's "May 2022 Business Survey Index (BSI) and Economic Sentiment Index (ESI)" released on the 25th, the BSI for all industries this month was recorded at 86, the same as the previous month.

The BSI is an indicator showing the business conditions as perceived by companies; if the number of firms responding negatively exceeds those responding positively, the index falls below 100. This index had been declining for three consecutive months from January this year but turned upward in April and has since stabilized.

Kim Dae-jin, head of the Corporate Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "Although the manufacturing sector's business conditions weakened compared to the previous month due to lockdown measures in major cities amid the spread of COVID-19 in China and increased burdens from raw material prices and logistics costs, the non-manufacturing sector improved thanks to the lifting of social distancing measures, resulting in the BSI remaining steady at 86."

By industry, the non-manufacturing sector's BSI rose by 1 point to 86 compared to the previous month. This is the highest record in 11 years and 5 months since December 2010 (86). Within the non-manufacturing sector, business facility management, business support, and rental services (+8 points), real estate (+7 points), and arts, sports, and leisure (+7 points) showed increases.

The manufacturing sector recorded a BSI of 86, down 1 point from the previous month, with declines in primary metals (-10 points) and other machinery and equipment (-5 points).

The June business outlook BSI rose by 1 point to 87, mainly driven by the non-manufacturing sector. The manufacturing sector's business outlook BSI fell by 1 point to 87, mainly due to decreases in chemical products (-8 points) and other machinery and equipment (-4 points).

The non-manufacturing sector's business outlook BSI increased by 1 point to 86, led by information and communication (+11 points), business facility management, business support, and rental services (+11 points), and real estate (+7 points).

Meanwhile, the Economic Sentiment Index (ESI) for May rose by 1.0 point from the previous month to 106.7. The ESI is centered around a long-term average of 100; when it exceeds 100, it indicates that the economic sentiment of all private economic agents, including companies and households, has improved compared to the past average.