August Hangyeonghyeop Business Survey Index (BSI) Forecast 97.1
Although the manufacturing sector, including semiconductors, has partially recovered, domestic companies are surveyed to expect unfavorable economic conditions next month.
On the 24th, the Korea Economic Association announced that a survey of the top 600 companies by sales (excluding financial industries) showed that the Business Survey Index (BSI) forecast for next month was 97.1. A BSI above the baseline of 100 indicates a positive economic outlook, while below 100 indicates a negative outlook. The BSI forecast has remained below 100 for 29 consecutive months (2 years and 5 months) since April 2022.
Both manufacturing and non-manufacturing sectors' forecasts for next month were below the baseline. The manufacturing BSI was 94.8. Thanks to the semiconductor boom, it rose 6.3 points from last month’s 88.5 but still fell short of the baseline due to ongoing concerns about sluggish domestic demand. It has remained below 100 for five consecutive months.
The BSI varied across detailed industries. Six sectors showed positive outlooks: Pharmaceuticals (125.0), Electronics and Telecommunications Equipment (116.7), Wood, Furniture, and Paper (111.1), Food and Beverage and Tobacco (105.6), General and Precision Machinery and Equipment (105.0), and Petroleum Refining and Chemicals (103.3). Meanwhile, Non-metallic Materials and Products (64.7), Textiles, Apparel, Leather, and Footwear (70.0), Metals and Metal Processing Products (82.1), and Automobiles and Other Transportation Equipment (89.2) were below 100.
The Korea Economic Association explained, "Manufacturing sentiment has partially improved, centered on electronics and telecommunications equipment, thanks to the recent semiconductor export boom," but added, "Concerns about domestic demand contraction due to prolonged high interest rates remain, resulting in mixed BSI outcomes across detailed industries."
The non-manufacturing BSI was 99.5. Although last month’s BSI rose to 105.5, surpassing the baseline of 100 for the first time this year, it fell below the baseline again after just one month.
Among seven detailed non-manufacturing sectors, Leisure, Accommodation, and Food Services (135.7), expected to benefit from the holiday season, and Transportation and Warehousing (104.0) are forecasted to improve. Conversely, five sectors including Wholesale and Retail Trade (98.1), which continues to face weak consumption, and Construction (95.3), with unstable order performance, fell below the baseline of 100.
In the survey by sector, the export sector recorded 99.2, showing a decline for two consecutive months. The forecast rose to 101.0 in June but has remained below 100 for two consecutive months since this month’s forecast of 98.1. Negative outlooks were also reported in all sectors including Employment (97.6), Profitability (96.3), Financial Conditions (94.7), Investment (91.5), and Inventory (107.2). All sectors have shown negative forecasts for two consecutive months. For inventory, a value above 100 indicates a negative outlook (excess inventory).
The Korea Economic Association pointed out, "In particular, manufacturing inventory (112.0) was the highest in about 4 years and 1 month since July 2020 (112.9)," and warned, "With expected economic slowdowns in the US and China in the second half of the year, there are concerns about a chain contraction in investment and production."
Lee Sang-ho, Head of the Economic and Industrial Division at the Korea Economic Association, stated, "Many companies are still experiencing financial burdens and performance pressures due to high interest rates and high exchange rates," and emphasized, "To stabilize corporate sentiment, corporate tax reforms should be implemented, and legislation that could worsen labor-management conflicts, such as amendments to the Labor Union Act, should be avoided."
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