Risks Cited as 'Domestic Consumption Slump' and 'Economic Downturn in Export Countries'
The Changwon Chamber of Commerce and Industry in Gyeongnam has announced the results of the "2024 Q4 Changwon Manufacturing Business Survey Index (BSI)" conducted among manufacturing companies in the Changwon area. According to the survey, which received responses from 165 companies, the BSI was recorded at 83.0, indicating that local businesses have a negative outlook for the fourth quarter.
The outlook for the fourth quarter fell below the benchmark due to the prolonged slump in domestic demand and growing concerns over economic downturns in major export markets. In terms of actual performance, key export industries in Changwon such as electronics, machinery, and steel, which rely heavily on overseas demand, appear to have been affected by the economic slowdown in regions like Europe and China.
The BSI for each category in Q4 2024 fell below the benchmark across the board: facility investment (92.7), sales (85.5), operating profit (76.4), and financial conditions (72.1). While facility investment showed a slight decline, the volatility in international energy prices and the decrease in sales had a significant impact on operating profits. Due to the prolonged high interest rate environment, both the performance and outlook for financial conditions were the lowest among all categories.
The only sector with a positive outlook for the fourth quarter was "Other Transportation Equipment Manufacturing" (127.3), a key manufacturing industry in Changwon.
This sector includes shipbuilding and the aerospace industry, which are important leading industries in the Changwon area. The recovery of shipbuilding, driven by increased demand for eco-friendly vessels and a rise in orders, along with growing demand in the defense industry leading to expanded exports of aircraft engines and other products, pushed the performance and outlook for other transportation equipment above the benchmark.
On the other hand, automobiles and parts (81.3), machinery and equipment (75.8), steel and metals (72.2), and electrical and electronics (53.3) all fell below the benchmark, indicating a negative outlook for Q4.
For automobiles and parts, risks such as eco-friendly regulations and fluctuations in raw material prices led to underperformance and a negative outlook. For steel and metals, the worsening real estate market and reduced infrastructure investment in China, a major export market, resulted in the lowest performance BSI among all sectors.
When asked about achieving their business performance (operating profit) targets set at the beginning of this year, 39.4% answered "slightly below target (within 10%)" and 22.4% answered "significantly below target," meaning 61.8% expect to miss their targets. Conversely, 24.2% responded that they would "meet the target," 13.3% said they would "slightly exceed the target (within 10%)," and 0.6% said they would "significantly exceed the target," indicating that 38.2% of respondents expect to meet or exceed their targets.
When asked about internal and external risks expected to impact business performance in the fourth quarter, "shrinking domestic consumption" (28.8%) was cited as the biggest risk factor.
A representative from the Changwon Chamber of Commerce and Industry said, "It appears that companies are facing difficulties due to negative internal and external business environments such as economic downturns in major export markets and sluggish domestic demand. In addition, the burden of interest costs from prolonged high interest rates and rising raw material prices are causing a slow recovery in corporate profitability."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
