May SME Business Outlook Index at 60.0... All-Time Low

27.6-Point Decline Compared to Same Month Last Year
Small and Medium Enterprises' Biggest Management Difficulty: Domestic Demand Slump

Source=Korea Federation of SMEs

[Asia Economy Reporter Kim Daeseop] The Korea Federation of Small and Medium Business (Kbiz) announced on the 27th that the Small and Medium Business Economic Outlook Index (SBHI) for May this year recorded 60.0, down 0.6 points and 27.6 points respectively from the previous month.

The SBHI for May this year marked the lowest level since the start of the all-industry statistics in February 2014. This reflected the significantly contracted sentiment among small and medium enterprises due to domestic demand shrinkage and export slowdown caused by the impact of the novel coronavirus disease (COVID-19), as well as domestic and international uncertainties. The SBHI has been on a downward trend for five consecutive months since January this year.

The manufacturing sector's economic outlook for May was 64.8, down 6.8 points from the previous month, marking the lowest level since February 2009 (60.0), right after the global financial crisis. On the other hand, the non-manufacturing sector (57.5) rebounded by 2.5 points from the previous month, showing some improvement. The construction industry is expected to rise by 0.9 points, and the service industry by 2.8 points.

Analyzing by industry, in manufacturing, four sectors including food products (68.9→74.2), non-metallic mineral products (71.5→75.3), and beverages (85.7→89.1) showed increases. Conversely, 17 sectors including electronic components, computers, video, audio and communication equipment (88.4→71.6), automobiles and trailers (78.1→62.0), and primary metals (79.0→64.3) declined. In non-manufacturing, construction (72.0→72.9) rose by 0.9 points. The service industry (51.5→54.3) increased by 2.8 points compared to the previous month.

Within the service industry, six sectors including accommodation and food services (30.1→53.5), repair and other personal services (43.4→58.0), and arts, sports and leisure-related services (58.5→66.6) showed increases. Conversely, four sectors including transportation (58.0→52.9), professional, scientific and technical services (73.4→69.9), and real estate and rental services (67.4→65.2) showed declines.

Source=Korea Federation of SMEs

Looking at the outlook by item across all industries, domestic sales (60.9→59.1), operating profit (59.0→57.7), and financial conditions (59.0→58.4) showed slight declines compared to the previous month. The export outlook (72.6→51.1) showed a significant drop. The counter-trend employment level outlook (101.9→104.2) was also expected to worsen.

Comparing the SBHI for May this year with the average SBHI for the same month over the past three years by item, in manufacturing, all items including overall economy, production, domestic demand, export, operating profit, financial conditions, and raw materials, as well as the counter-trend items of facilities, inventory, and employment outlook, are expected to deteriorate compared to the previous three-year average. In non-manufacturing, all items are also expected to fall short of the average.

In April this year, the main management difficulties of small and medium enterprises (multiple responses) showed that domestic demand sluggishness (77.1%) had the highest proportion. This was followed by rising labor costs (38.1%), excessive competition among companies (36.7%), difficulties in financing (25.4%), and delayed collection of sales proceeds (25.1%).

Looking at recent trends in management difficulties for small and medium enterprises, the proportion of difficulties due to rising labor costs (43.6→38.1) has gradually decreased, while domestic demand sluggishness (75.0→77.1) increased in response to the full-scale impact of COVID-19. This is interpreted as reflecting the significantly contracted sentiment among small and medium enterprises.

The average operating rate of small and medium manufacturing enterprises in March this year was 69.8%, up 0.2 percentage points from the previous month. Compared to the same month last year, it fell by 4.5 percentage points. By company size, small enterprises fell by 0.7 percentage points from the previous month to 65.7%, while medium enterprises rose by 1.0 percentage point to 73.7%. By company type, general manufacturing fell by 0.7 percentage points from the previous month to 68.2%, while innovative manufacturing rose by 2.7 percentage points to 74.2%.

The SBHI survey for small and medium enterprises in May was conducted from April 10 to 20 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 the number of companies responding positively is greater than those responding negatively. A score below 100 indicates the opposite.

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