"Avoided the Worst... May Construction Business Index Stays Above 60, Recession Phase Continues"

[Asia Economy Reporter Yuri Kim] The Construction Business Survey Index (CBSI) for May showed a slight improvement compared to the previous month. Due to the impact of government consumption support measures and the recovery of the domestic economy, the volume of construction work has also avoided the 'worst-case scenario.' However, since the CBSI remains around the 60-point level, it is analyzed that the recession phase is still ongoing.

According to the Korea Construction Industry Research Institute on the 2nd, the CBSI for May recorded 64.8, an increase of 4.2 points from the previous month. The CBSI had recorded its lowest point in 7 years and 1 month at 59.5 in March, when the COVID-19 pandemic fully began. In April, it remained very sluggish at 60.6, similar to the previous month. Then in May, it rose by 4.2 points to 64.8, indicating a partial recovery of the index.

Park Cheol-han, a senior researcher at the Korea Construction Industry Research Institute, explained, "It seems that the volume stagnation situation has somewhat eased, but the financial situation of companies has worsened further," adding, "The construction market is still not in a good state." It is analyzed that this reflects the recovery of the domestic economy, such as increased household consumption due to government support policies. Specifically, the institute judged that the sharply deteriorated new construction orders and construction work progress have somewhat stabilized.

Although the index recovered compared to the previous month, it did not reach the mid-60s level, so the construction market is still interpreted as sluggish. In particular, due to economic uncertainty, indices related to financing such as fund procurement and construction payment BSI worsened compared to the previous month. The institute stated, "It is necessary to observe the trend over time to see whether the Bank of Korea's interest rate cut at the end of last month will have a positive impact on the construction market in the future."

The index for June is forecasted to rise by 10.0 points from May to 74.8. Senior researcher Park said, "An increase of 10 points in the forecast for the following month compared to the actual performance means that construction companies expect the recession situation to improve further in June," adding, "It is judged that this reflects expectations for government public construction projects aimed at economic stimulus."

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