KERI's BSI Survey of Top 600 Companies
August Outlook at 92.6... Second Consecutive Monthly Decline
Below Baseline of 100 for 41 Months
Both Manufacturing and Non-Manufacturing Sectors Expected to Remain Sluggish
As the date approaches for the United States to impose a 25% reciprocal tariff on South Korea?now about a week away?business sentiment among Korean companies has further deteriorated.
The Korea Economic Research Institute (KERI) announced on the 23rd that, based on a survey of the top 600 companies by sales, the Business Survey Index (BSI) outlook for August was calculated at 92.6.
The BSI indicates a positive business outlook compared to the previous month if it is above the baseline of 100, and a negative outlook if it is below. The BSI outlook has declined for two consecutive months, recording 94.7 in June and 94.6 this month. Since April 2022 (99.1), the index has remained below the baseline for 41 consecutive months, marking the longest slump on record.
Both the manufacturing sector (87.1) and the non-manufacturing sector (98.3) are expected to remain sluggish in August. The manufacturing BSI has shown weak performance for 17 consecutive months since April of last year. This month, it rose by only 1 point from 86.1. It is the first time in seven months since December last year to January this year that the index has remained in the 80s for two consecutive months. The non-manufacturing BSI, which had climbed to 103.4 in July, has also declined again, turning the business outlook negative.
By detailed manufacturing industry, pharmaceuticals (125.0) and electronics and communications equipment, including semiconductors (111.1), showed a favorable outlook. Excluding food, beverages, and tobacco, which exactly met the baseline of 100, the other seven industries?including textiles, apparel, and leather and footwear (50.0), as well as petroleum refining and chemicals (74.1)?were expected to perform poorly.
KERI interpreted that, amid a year-on-year decline in exports to the U.S. since the beginning of this year due to U.S. tariff pressure, business sentiment among export-oriented manufacturing companies has been significantly dampened by concerns that reciprocal tariffs will become a reality starting from August 1.
KERI also explained that even for the pharmaceutical and semiconductor industries, which showed a favorable outlook, the improvement is only temporary. This is because President Donald Trump has already announced tariffs by item, and companies are expected to engage in "rush exports" to the U.S. before the tariffs take effect.
Among the seven detailed non-manufacturing industries, leisure, lodging, and dining (123.1), which are expected to benefit from seasonal demand, and wholesale and retail (110.6), which are influenced by supplementary budgets and policies to boost domestic demand, are projected to perform well. Excluding electricity, gas, and water supply, which exactly met the baseline of 100, the remaining four industries are expected to remain sluggish.
All surveyed BSI components?including domestic demand (91.7), profitability (91.7), financial conditions (92.0), exports (92.3), investment (92.3), employment (92.3), and inventory (104.0; a reading above 100 for inventory is considered negative as it indicates excess)?showed negative outlooks. The actual BSI for this month was recorded at 90.0. The slump has continued for 42 consecutive months since February 2022 (91.5).
Lee Sangho, head of KERI's Economic and Industrial Division, stated, "The tariff bomb triggered by Trump and the severe slump in demand are pushing our economy and companies into a very difficult situation." He added, "It is necessary to maintain an expansionary fiscal policy stance to prevent a rapid cooling of domestic demand and to further strengthen government efforts to improve the trade environment."
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