Manufacturing Companies Expect Export Performance Improvement Centered on Semiconductors... BSI Hits Highest Level in 11 Quarters

KCCI Surveys Manufacturing Business Sentiment Index BSI
Positive Outlook for Semiconductors and Cosmetics
Steel, Refining, Petrochemicals Forecasted 'Cloudy'
Concerns Over Domestic Consumption Contraction and Oil Price Instability

Domestic manufacturing companies showed improved export performance centered on semiconductors, leading to expectations of economic recovery in the second quarter of this year.

According to the industry on the 31st, the Korea Chamber of Commerce and Industry conducted a survey of 2,230 manufacturing companies nationwide on the '2024 2nd Quarter Manufacturing Business Survey Index (BSI).' The result was 99, up 16 points from the first quarter forecast (83), marking the highest level in 11 quarters since the third quarter of 2021 (103).

Trends in the Korea Chamber of Commerce and Industry Manufacturing BSI Outlook over the Past 3 Years. Graph provided by Korea Chamber of Commerce and Industry

A BSI above 100 means that more companies view the economy of the quarter positively compared to the previous quarter. Below 100 indicates the opposite.

The economic outlook differed between export companies (102) and domestic companies (98). By industry, semiconductors (114) exceeded the baseline as production and exports increased significantly due to the recovery of the global IT economy.

With the popularity of K-Beauty, demand for cosmetics and exports of beauty medical devices expanded, resulting in more positive outlooks in both cosmetics (124) and medical precision (119) sectors. The electric industry (117), expected to improve due to the rebound in prices of key battery materials, also showed a favorable outlook for the second quarter.

On the other hand, steel (92) and refining & petrochemicals (97) saw limited recovery in economic outlook due to continued sluggishness caused by weak domestic demand in China and increased supply.

Non-metallic minerals (90) fell below the baseline due to manufacturing cost burdens such as rising oil prices and fuel costs, in addition to contraction in the construction industry, its downstream sector. The shipbuilding industry (95) was negatively affected by prolonged Red Sea risks, labor shortages, and deteriorating performance of small and medium shipbuilders.

By region, only Honam region (109), which continues to see an increase in automobile exports, and Chungcheong region (104), with a high proportion of semiconductor exports, exceeded the baseline this year. Despite relatively favorable automobile industry conditions, the Dongnam region (96) and Daegyeong region (98) showed predominantly negative outlooks due to sluggish steel and small and medium shipbuilding sectors.

The Gangwon region (91), with the strongest negative outlook, had many companies, mainly in food and beverage, expecting a worsening economic sentiment next quarter. This appears to be due to concerns over demand slowdown caused by price increases.

Companies cited domestic consumption contraction (55.2%) and instability in raw material and oil prices (50.1%) as the biggest domestic and international risks (multiple responses) affecting their performance in the first half of this year. This was followed by export slowdown due to worsening external economic conditions (35.1%), deterioration in financing conditions (16.9%), and risks such as exchange rate increases (13.2%).

Kim Hyun-soo, head of the Economic Policy Team at the Korea Chamber of Commerce and Industry, said, "Although the economy is on the verge of a rebound supported by export recovery, domestic instability factors are limiting companies' expectations. The 22nd National Assembly and government, to be formed after the general election, must work together to invigorate the economy by promoting private consumption so that export momentum can be connected to domestic demand and our economy can enter a growth phase."