Engineering BSI for First Half of Next Year Projected at 67.2...Down from Second Half of This Year

"Adjustment Phase Following Second-Half Recovery"

There are projections that the business conditions for engineering companies in the first half of next year will deteriorate compared to this year.

At the Korean Air Maintenance Hangar in Jung-gu, Incheon, Korean Air predictive maintenance engineers and mechanics are inspecting the temperature sensor installed on the engine inlet of an A330 aircraft. Photo by Kang Jinhyung

On December 21, the Korea Engineering Association announced the results of its Business Survey Index (BSI) conducted on 970 domestic engineering companies. The BSI for the first half of next year is forecast to be 67.2, down 4.3 points from 71.5 in the second half of this year.

The BSI is a numerical index that quantifies companies' perceptions and outlook on business conditions. A value above 100 indicates that positive outlooks are more prevalent, while a value below 100 means negative outlooks are dominant.

The association explained, "The pace of business improvement is expected to slow due to budget execution adjustments by major clients, increased uncertainty in domestic and overseas investment plans, and the staggered schedules of some large-scale projects." However, "this is seen as a brief adjustment phase following the recovery in the second half of this year, rather than a reversal of the structural recovery trend. It is not expected to hinder the medium- to long-term recovery trajectory."

In the construction sector, the BSI rose slightly from 64.2 in the first half of this year to 65.9 in the second half, but it is projected to make a minor adjustment to 65.7 in the first half of next year. This is expected to be affected by public sector budget adjustments and delays in the awarding of certain projects.

For non-construction sectors such as machinery and equipment, electrical, and information and communications, the BSI increased slightly from 79.8 in the first half of this year to 80.7 in the second half, but is projected to fall to 69.6 in the first half of next year due to a reduction in capital investment across the manufacturing industry.

The biggest management challenge in the second half of this year was "sluggish public and private orders" (52.9%), followed by "economic uncertainty" (10.6%), "intensified competition" (9.7%), "rising labor costs" (9.6%), and "shortage of technical personnel" (7.0%). In the first half of next year, sales and net profit of engineering companies are expected to decrease by 2.66% and 3.20%, respectively.

By company size, sales are projected to decrease by 3.56% for small enterprises and by 1.68% for medium-sized enterprises, while large enterprises are expected to see an increase of 1.07%. Net profit is also expected to decline for small enterprises (-4.14%) and medium-sized enterprises (-2.13%), but increase for large enterprises (0.33%), indicating a widening gap in business conditions by company size.