▲ Containers stacked up at Busan Port
Domestic business sentiment has turned pessimistic again after just one month, weighed down by resurgent tensions in the Middle East.
The Federation of Korean Industries (FKI) announced today (September 28) that the Business Survey Index (BSI) outlook for October stood at 98.6, based on a survey of the top 600 companies by sales.
A BSI reading above 100 indicates that business prospects are more optimistic compared to the previous month, while a reading below 100 indicates pessimism.
The BSI outlook fell below the baseline of 100 in just a month, turning negative.
The BSI outlook for September had previously exceeded the baseline of 100 for the first time in six months, following the March outlook (102.7) which was surveyed before the U.S.-Iran crisis broke out.
By sector, the October BSI outlook for manufacturing dropped to 95.6, turning negative from the previous month (101.7), while the non-manufacturing sector registered 101.8, staying above the baseline of 100 for the second consecutive month following the previous month (102.4).
Among detailed manufacturing sectors, metals and metal processed products (107.7) fared well, driven by expanding demand in the shipbuilding industry. In contrast, sluggishness continued for food and beverages (84.2), as the holiday season boom ended, and petroleum refining and chemicals (85.2), amid sustained oil price increases and oversupply, showing a clear temperature difference across industries.
In the non-manufacturing sector, wholesale and retail (108.5), professional, scientific, technical, and business support services (108.3), and electricity, gas, and water (105.6) showed strong performance.
While eased burdens on import prices and expectations for domestic demand recovery led to positive prospects in the non-manufacturing sector, the construction industry (95.3), which has been suffering from a prolonged slump, remained below the baseline due to financial cost burdens stemming from interest rate hikes.
By category, domestic demand (101.4) stayed above the baseline for the second consecutive month following last month (100.3), whereas exports (99.7) showed a negative outlook for the first time in five months since the May outlook (93.2).
This is interpreted as the recent appreciation of the Korean won acting as a factor that worsens profitability for the export sector, such as through weakened external price competitiveness and foreign currency translation losses, while acting as a relief for the domestic demand sector by easing import raw material and parts prices as well as foreign currency settlement burdens.
Employment (100.3) turned to a positive outlook for the first time in 4 years and 1 month since September 2022 (101.8).
The BSI actual result for September was recorded at 98.9.
The BSI actual results have shown a sluggish trend for 4 consecutive years and 8 months starting from February 2022 (91.5).
Lee Sang-ho, head of the FKI Economic Division, said, "There is a concern that the contraction of business sentiment may continue due to raw material price instability caused by resurgent Middle East tensions and global interest rate hike movements," adding, "It is necessary to stimulate domestic industrial production by expanding eligibility for domestic production tax credits and to improve business sentiment through labor deregulation support within mega special zones."
(Photo provided by the Federation of Korean Industries, Yonhap News)
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