BSI Remains Below Baseline of 100 for 3 Years and 9 Months
Manufacturing Sluggish, While Non-Manufacturing Turns Positive
Domestic Demand, Investment, and Exports Sluggish for 18 Consecutive Months
Signs of Improvement... Domestic Demand an
The Business Survey Index (BSI), an indicator that reflects the economic conditions as perceived by domestic companies, remained below the baseline of 100 for the 45th consecutive month. This suggests that, overall, a majority of companies maintain a pessimistic outlook on future economic conditions. Notably, this survey revealed a polarization in outlooks across different industries, with forecasts diverging sharply by sector.
According to a BSI survey conducted by the Federation of Korean Industries on the top 600 companies by sales, the BSI outlook for next month was 98.7. As a result, the BSI outlook has failed to exceed 100 since April 2022, when it recorded 99.1. A BSI above 100 indicates that companies have a more positive outlook on the economy compared to the previous month, while a BSI below 100 reflects a negative outlook. The actual BSI for November was 98.1, marking 46 consecutive months of sluggishness since February 2022, when it stood at 91.5.
The economic outlook for December varied dramatically by industry. The manufacturing BSI dropped by 4.9 points from the previous month (96.8) to 91.9, marking 21 consecutive months of weakness since April last year. In contrast, the non-manufacturing BSI jumped by 12.4 points from the previous month (92.8) to 105.2, surpassing the baseline of 100 for the first time in five months.
Among the 10 detailed manufacturing sectors, general and precision machinery and equipment (including semiconductor equipment) posted a strong outlook at 119.0, while electronics and telecommunications equipment followed at 111.1. Textiles, apparel, leather, and footwear stood at the baseline of 100.0. The remaining seven sectors, including non-metallic materials and products (69.2), were projected to remain sluggish.
Regarding these results, the Federation of Korean Industries analyzed, "While a boom in semiconductors is expected to drive some recovery in related industries, sluggishness in the non-metallic materials and products sector due to a slowdown in the real estate market, and worsening conditions in metals and metal processing due to steel tariffs, are dampening overall business sentiment in manufacturing."
Among the seven detailed non-manufacturing sectors, electricity, gas, and water supply (121.1), leisure, accommodation, and food services (114.3), information and communications (106.7), professional, scientific, technical, and business support services (106.7), wholesale and retail distribution (105.1), and transportation and warehousing (103.8) were all projected to perform well. Construction (95.5) was the only non-manufacturing sector expected to remain sluggish. The Federation of Korean Industries explained that seasonal factors such as year-end demand and a recovery in private consumption have boosted business sentiment in the non-manufacturing sectors.
The December BSI by sector showed negative outlooks across all categories, including domestic demand (98.1), exports (97.3), and investment (95.0). This across-the-board weakness has persisted for 18 consecutive months since July last year. However, domestic demand (98.1) and investment (95.0) both reached their highest levels of the year, and exports also recovered to their highest level since February this year (97.5), indicating an upward trend in all three sectors.
Lee Sangho, Head of the Economic and Industrial Division at the Federation of Korean Industries, stated, "Exports, especially in semiconductors, are showing a favorable trend, but most manufacturing sectors continue to face difficulties due to currency fluctuations and tariff burdens. In addition to efforts to stabilize exchange rates and tariffs, support measures to restore the competitiveness of key industries must be leveraged to revitalize corporate activity."
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