Construction Companies' Sentiment Index Returns to 60 Level After 3 Months... "Impact of Decreased Orders"

Last month, the Construction Business Survey Index (CBSI) for construction companies fell back to the 60 level after three months. This is interpreted as a seasonal effect due to a decrease in construction orders at the beginning of the year.

A reconstruction construction site of an apartment in downtown Seoul. / Photo by Hyunmin Kim kimhyun81@

The Korea Construction Industry Research Institute announced on the 4th that the CBSI for January recorded 67.0, down 8.5 points from the previous month. When the CBSI falls below the baseline (100), it means that more companies view the current construction market pessimistically than optimistically, and a value above 100 indicates the opposite.

The CBSI showed a recovery trend for three months after hitting a yearly low of 61.1 in September last year, rising to 64.8 in October, 73.4 in November, and 75.5 in December. However, with new construction orders declining at the start of the new year, the index fell below the 70 level.

Researcher Park Cheol-han analyzed, "The index declined due to the seasonal effect of decreased construction orders at the beginning of the year," adding, "Especially, the decrease in civil engineering orders had a significant impact." He further explained, "Typically, the CBSI drops by about 9 to 10 points in January compared to the previous month."

Looking at the detailed BSI components, new orders fell by 14.4 points from the previous month to 71.9. Indices related to construction volume, such as construction progress (80.3, -3.8 points) and order backlog (76.4, -10.0 points), all declined compared to the previous month. In particular, the new order performance index by construction type showed that civil engineering dropped by as much as 24.8 points to 65.0 compared to the previous month.

The CBSI forecast for February is expected to rise 10.4 points from January to 77.4. Researcher Park said, "Expectations for a recovery in the construction market were partially reflected in the index as the government announced measures to activate construction investment, such as advancing fiscal spending in the first half of the year." He added, "However, it is necessary to observe the trend further to see whether the index will continue to recover."