Manufacturing BSI Improves After 5 Months... Impact of High-Efficiency Home Appliance Rebates, etc.

Bank of Korea 'June Business Survey Index (BSI) and Economic Sentiment Index (ESI)'

On the 10th, citizens are looking around cooling appliances such as fans at Lotte Hi-Mart Seoul Station branch in Seoul. [Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] The manufacturing sector's business sentiment, which had been contracted due to the impact of the novel coronavirus disease (COVID-19), improved compared to the previous month for the first time in five months. The overall industry business sentiment, combining manufacturing and non-manufacturing sectors, also showed improvement for two consecutive months.

According to the "June 2020 Business Survey Index (BSI) and Economic Sentiment Index (ESI)" released by the Bank of Korea on the 30th, the manufacturing business condition BSI recorded 51 this month, rising 2 points from the previous month. This is the first time since January (76, +2 points) that the manufacturing business condition BSI has shown improvement compared to the previous month.

The manufacturing business condition BSI had steadily declined since January, dropping to 49 last month, the lowest since February 2009 (43), before rebounding after five months. The overall industry business condition BSI rose 3 points from last month to 56, showing an upward trend for two consecutive months.

The BSI is an index that surveys entrepreneurs' judgments and outlooks on the current business situation. If the number of respondents answering negatively exceeds those answering positively, the index falls below 100. The lower the figure, the worse the business sentiment among companies. Although it improved compared to last month, the BSI still remained below 100, indicating that the absolute business sentiment was negative.

Looking at manufacturing by company size, large enterprises (58) and small and medium enterprises (45) rose by 1 point and 4 points, respectively. By company type, export companies (59) increased by 6 points, while domestic companies (47) remained at the same level as last month. Export companies refer to those whose export sales account for 50% or more of total sales.

Regarding the manufacturing sales BSI, June's performance was 53, up 5 points from the previous month. Among sales BSIs, domestic sales (+6 points) rose more significantly than export BSI (+2 points), confirming an improvement in domestic sales for export companies.

Kang Chang-gu, head of the Corporate Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "This appears to be mainly due to government policy effects such as the rebate policy for purchasing top-efficiency home appliances, emergency disaster relief funds, and the easing of export slumps due to the resumption of economic activities in major countries." According to the Bank of Korea, supported by the rebate policy, the recent sales of domestic home appliance manufacturers from March 23 to June 18 increased approximately 2.3 times compared to the same period last year.

The manufacturing profitability BSI rose 4 points from the previous month to 78, and the financing condition BSI also improved by 4 points to 68.

By industry, the primary metal sector's business condition BSI fell 15 points due to sluggishness in upstream industries (automobiles), but electronics, video, and communication equipment (+7 points) and electrical equipment (+13 points) showed signs of recovery. This was influenced by increased exports of smartphones and sales of electronic components related to displays, as well as increased sales of home appliances.

The non-manufacturing business condition BSI also improved for two consecutive months. The non-manufacturing business condition BSI for June was 60, up 4 points from the previous month. Although transportation and warehousing fell 8 points due to rising fuel costs, sectors such as wholesale and retail (+4 points) and construction (+11 points) showed improvement, supported by partial recovery in domestic demand and improved construction progress rates.

Meanwhile, the Economic Sentiment Index (ESI), calculated by combining the corporate sentiment index and the consumer sentiment index, recorded 63.1, up 5.3 points from the previous month. The seasonally adjusted ESI cyclical component fell 5.2 points from the previous month to 56.4, marking a record low. This survey was conducted from June 15 to 22 targeting 3,696 corporate entities nationwide, with 3,170 companies responding.

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