Consumer Sentiment Continued to Improve Along with Business Sentiment... "Cannot Guarantee September"

Bank of Korea 'August 2020 Business Survey Index (BSI) and Economic Sentiment Index (ESI)'

[Asia Economy Reporter Eunbyeol Kim] The business sentiment, which had been contracted due to the impact of the novel coronavirus infection (COVID-19), showed signs of improvement in August as well. Both manufacturing and non-manufacturing sectors' business sentiment improved simultaneously.

According to the "August 2020 Business Survey Index (BSI) and Economic Sentiment Index (ESI)" released by the Bank of Korea on the 26th, the overall industry BSI recorded 66 this month, rising 4 points compared to the previous month. The overall industry BSI has steadily increased after falling to 51 in April.

The manufacturing sector, which was particularly hit hard by COVID-19, is also recovering. The manufacturing business condition BSI rose 7 points from the previous month to 66 this month. The manufacturing BSI had steadily declined since January, dropping to 49 in May, but has since rebounded and is rising.

However, the Bank of Korea explained that the survey period, from the 11th to the 19th of this month, did not fully reflect the impact of the strengthened social distancing measures due to the second wave of COVID-19. The BSI is based on surveys conducted with companies, and 70-80% of the surveys were conducted before the second wave of COVID-19. Kim Daejin, head of the Corporate Statistics Team at the Bank of Korea’s Economic Statistics Bureau, stated, "It is difficult to predict the situation in September, but since many analyses suggest a COVID-19 pandemic, there are mixed upward and downward risks."

Although corporate sentiment is recovering, the absolute figures remain low. The BSI is an indicator that surveys business owners' judgments and outlooks on their current business conditions; if the number of respondents with a negative view exceeds those with a positive view, the index falls below 100. A lower figure indicates worse perceived business conditions. This suggests that many companies still view the economic outlook negatively.

Looking at manufacturing by company size, the business condition BSI for large enterprises (70) and small and medium enterprises (62) each rose 8 points compared to the previous month. By company type, export companies (72) increased by 8 points, and domestic companies (62) rose by 7 points. Export companies refer to those whose export sales account for 50% or more of total sales. By sector, business sentiment improvements were notable in automobiles (+23 points), electronics/video/telecommunications equipment (+14 points), and primary metals (+11 points).

The non-manufacturing business condition BSI also recovered for the fourth consecutive month. The non-manufacturing BSI in August was 66, up 1 point from the previous month.

Meanwhile, the Economic Sentiment Index (ESI), calculated by combining the corporate sentiment index with the consumer sentiment index, recorded 79.7, up 6.9 points from the previous month. The seasonally adjusted and irregular component-removed ESI cyclical component rose 0.5 points from the previous month to 68.9. This survey was conducted from August 11 to 19, targeting 3,255 corporate entities nationwide, with 2,820 companies responding.

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