Small and Medium-Sized Manufacturing Production Plunges in May... Prolonged Domestic Market Slump Cited

Release of July Issue of KOSI SME Trends

In May of this year, production in the small and medium-sized manufacturing sector experienced a significant decline compared to the same month last year. In contrast, the small and medium-sized service sector saw a slight increase, driven by a recovery in the finance and insurance industries.

On July 30, the Korea Small Business Institute announced the release of the July 2025 issue of "KOSI SME Trends." According to the report, the production index for small and medium-sized manufacturers in May 2025 dropped by 4.7% year-on-year. This was due to a decrease in the number of working days (-0.5 days) and the prolonged stagnation of the domestic market. During the same period, the small and medium-sized service sector increased by 0.6%, mainly due to recovery in finance and insurance, as well as health and social welfare services.

In May 2025, retail sales amounted to 55.2 trillion won, marking a 0.8% increase compared to the same month last year. By product category, sales of durable goods (3.6%) and non-durable goods (0.2%) increased year-on-year, while sales of semi-durable goods (-1.1%) declined. The retail sales index, with price factors excluded, decreased by 0.2% during the same period.

In June 2025, the number of employees at small and medium-sized enterprises was 25,738,000, a decrease of 54,000 compared to the same month last year. The number of employees at companies with 5 to 299 workers increased by 131,000 year-on-year, but the number of employees at companies with 1 to 4 workers decreased by 185,000, resulting in an overall decline. By industry, the manufacturing sector (-73,000) and construction sector (-119,000) continued to see decreases in employment. Among wage workers in small and medium-sized enterprises, the number of regular employees (+71,000) and temporary employees (+68,000) increased, while the number of daily workers (-62,000) decreased.

In May 2025, the number of newly established businesses was 92,285, a 7.5% decrease compared to the same month last year. The number of startups in technology-based industries was 16,509, a 6.9% year-on-year decrease. Startup activity declined across most sectors, including manufacturing (-15.4%), services (-6.5%), and construction (-15.7%).

A representative from the Korea Small Business Institute stated, "Key economic indicators for small and medium-sized enterprises, such as production, employment, and startups, remain sluggish. At the same time, increased external uncertainties such as tariffs are expected to pose downside risks to the SME economy going forward." The representative added, "Policy authorities need to continue monitoring the effects of the supplementary budget on domestic demand recovery, while also seeking policy responses to prevent damage to SMEs based on an analysis of how external uncertainties are transmitted domestically."