COVID Shock Q2 Employment Performance 'All-Time Low'... Manufacturing Inventory 'Highest in 11 Years'

[Asia Economy Reporter Kim Hyewon] The long-lasting impact of the novel coronavirus infection (COVID-19) has led to the worst employment performance on record in the second quarter. Inventory levels of manufacturing companies have reached the highest point since the global financial crisis.

On the 28th, the Korea Economic Research Institute conducted a Business Survey Index (BSI) survey targeting the top 600 companies by sales, revealing that the July outlook stood at 73.7. This is a 4.8-point increase from last month (68.9), but still significantly below the baseline of 100. The June performance figure was 74.2, up 3.6 points from the previous month, but it was the lowest level in 22 years for the same month.

Although the overall economic outlook for July slightly improved compared to the previous month, the inventory outlook worsened significantly. In particular, the manufacturing inventory outlook (112.9) recorded the highest level in 11 years since March 2009 (115.2) during the global financial crisis. The Korea Economic Research Institute analyzed that due to renewed concerns over the resurgence of COVID-19, consumer sentiment has contracted again, and with the re-ignition of the US-China trade dispute and increased global economic uncertainty, the recovery of domestic and international product demand has slowed, causing companies to struggle with inventory depletion.

The June performance figure recorded 74.2, remaining below the baseline for 62 consecutive months. By sector, all sectors including domestic demand (76.8), exports (78.7), investment (77.6), funds (86.6), inventory (107.1), employment (83.7), and profitability (82.6) were below the baseline. Notably, the employment performance BSI for the second quarter (April to June) averaged 80.6, a sharp 17-point drop compared to the second quarter of the previous year (97.6), marking the lowest level since related statistics began in 1980.

Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, stated, "Although expectations for economic recovery have somewhat improved the outlook, domestic and international uncertainties persist, and concerns about a double-dip recession due to a second wave of COVID-19 in the second half of the year are emerging, making it difficult to be optimistic about the future economy. Active government policy support is necessary to improve the business environment to minimize the prolonged real economic shock and unprecedented employment shock."

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