SME Business Outlook Index at 60.6 in April This Year... All-Time Low

A Sharp Drop of 17.9 Points Compared to Last Month
Average Operating Rate of Small and Medium Manufacturing Industries in February Also at Lowest Level

[Asia Economy Reporter Kim Daeseop] The Korea Federation of Small and Medium Business announced on the 30th that the Small and Medium Business Economic Outlook Index (SBHI) for April this year recorded 60.6, down 17.9 points from the previous month and 25.1 points from the same month last year.

The SBHI for April this year marked the lowest level since the start of all-industry statistics in February 2014. As the economic downturn deepens, the overlapping sluggishness in domestic demand and exports due to the global spread of the novel coronavirus infection is expected to sharply dampen the sentiment of small and medium enterprises.

The manufacturing sector's economic outlook for April fell 8.0 points from the previous month to 71.6, marking the lowest since March 2009 (70.5). The non-manufacturing sector also recorded the lowest since the survey began in February 2014, dropping 22.9 points from the previous month to 55.0, largely due to a sharp decline in the service industry. Construction fell 16.7 points and services 24.2 points compared to the previous month.

Analyzing by industry, in manufacturing, four sectors including Automobiles and Trailers (69.9→78.1), Other Transport Equipment (70.2→75.0), and Wood and Wood Products (73.1→73.9) showed increases. On the other hand, 18 sectors including Medical Substances and Pharmaceuticals (96.3→68.3), Textile Products (70.0→46.9), and Printing and Recorded Media Reproduction (74.8→53.8) declined.

In non-manufacturing, Construction (88.7→72.0) fell by 16.7 points. The service industry (75.7→51.5) dropped 24.2 points from the previous month. All 10 service sectors declined, with particularly large drops in Education Services (81.9→43.9), Arts, Sports and Leisure-related Services (91.2→58.5), and Repair and Other Personal Services (75.9→43.4).

Looking at the outlook by item across all industries, domestic sales (77.9→60.9), exports (86.9→72.6), operating profit (74.0→59.0), and financial conditions (73.2→59.0) all declined compared to the previous month. The inverse indicator, employment level (99.2→101.9), also rose, indicating deterioration across all items.

Comparing the SBHI for April this year with the average SBHI for the same month over the past three years, in manufacturing, the outlook for overall economy, production, domestic demand, exports, operating profit, financial conditions, and raw materials, as well as the inverse indicators of facilities, inventory, and employment, are all expected to worsen compared to the previous three-year average. The non-manufacturing sector also showed deterioration in all items.

In March, the main difficulties faced by small and medium enterprises were dominated by sluggish domestic demand (75.0%). Rising labor costs (43.6%), excessive competition among companies (35.8%), and difficulties in financing (20.1%) followed. Looking at recent trends in management difficulties for SMEs, the response rate for the biggest issue, sluggish domestic demand (68.1→75.0), has been increasing, becoming a chronic problem, while rising labor costs (48.4→43.6) remain high due to minimum wage increases but show a slight decreasing trend overall.

The average operating rate of small and medium manufacturing enterprises in February was 69.6%, down 1.0 percentage point from the previous month and 2.8 percentage points from the same month last year. This is the lowest level since August 2009 (69.1%), during the global financial crisis. Small enterprises recorded 66.4%, down 0.6 percentage points from the previous month, and medium enterprises 72.7%, down 1.4 percentage points. The seasonally adjusted index fell 1.3 percentage points from the previous month to 70.1%.

The April Small and Medium Business Economic Outlook Survey was conducted from the 13th to the 20th of this month targeting 3,150 small and medium enterprises. The SBHI is an index calculated by subdividing responses into a 5-point scale and multiplying each frequency by a weight. A score above 100 indicates that more companies responded positively than negatively, while below 100 indicates the opposite.

This content was produced with the assistance of AI translation services.