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 is a forecast 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 a Business Survey Index (BSI) conducted on 970 domestic engineering companies. According to the survey, the BSI for the first half of next year is projected to be 67.2, a decrease of 4.3 points from the second half of this year (71.5).

The BSI is an index that quantifies companies' perceptions of the current business climate and their outlook. A value above 100 indicates a predominance of positive expectations, while a value below 100 means negative expectations are more prevalent.

The association explained, "The pace of business recovery is expected to slow due to factors such as 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 not as a reversal of a structural recovery trend, but rather as a brief adjustment phase following the recovery in the second half of this year, and it is not expected to hinder the medium- to long-term recovery trajectory."

In the construction sector, the index 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 slight adjustment to 65.7 in the first half of next year. Adjustments to public sector budgets and delays in some project orders are expected to have an impact.

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

As for the main management challenges in the second half of this year, "sluggish public and private orders (52.9%)" was cited as the biggest factor, 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, the 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 companies and 1.68% for medium-sized companies, while large companies are expected to see an increase of 1.07%. Net profit is also expected to decrease for small (-4.14%) and medium-sized companies (-2.13%), but increase for large companies (0.33%), indicating a widening business performance gap by company size.