COVID-19 Third Wave... Corporate Sentiment Collapses After Three Months

Manufacturing BSI Turns Down After 7 Months Amid Auto Industry Slump
Non-Manufacturing BSI, Hit Hard by COVID, Falls 5 Points Month-on-Month

[Asia Economy Reporter Kim Eun-byeol] The corporate sentiment index plummeted for the first time in three months due to the third wave of the novel coronavirus infection (COVID-19).

According to the Business Survey Index (BSI) released by the Bank of Korea on the 30th, the BSI for overall industry business conditions in December was 75, down 3 points from the previous month. This marks the first decline in three months since it recorded 64 in September, which was a 2-point drop from the previous month.

The BSI is a statistic that surveys business owners' judgments and outlooks on current business conditions; if negative responses outnumber positive ones, the index falls below 100. This survey was conducted from December 14 to 21, when daily COVID-19 cases exceeded 1,000, with responses from 2,808 corporate firms.

As the resurgence of COVID-19 continued, sentiment in both manufacturing and non-manufacturing sectors contracted, with the non-manufacturing sector, which is more severely impacted by COVID-19, showing a particularly sharp decline. Kim Dae-jin, a team leader at the Bank of Korea, explained, "The non-manufacturing sector was more directly affected by COVID-19, resulting in a larger drop compared to manufacturing."

In December, the manufacturing business conditions BSI (82) fell 3 points from the previous month, mainly due to declines in automobiles (-16 points), electrical equipment (-11 points), and rubber & plastics (-9 points). In the automobile industry, the BSI dropped significantly as parts sales decreased and finished vehicle manufacturers reduced operations. The electrical equipment BSI declined due to reduced sales of electrical materials, and the rubber & plastics BSI fell as raw material prices rose.

This marks the first decline in the manufacturing business conditions BSI in seven months. However, the manufacturing BSI remains above the long-term average (79, from January 2003 to December 2019).

By company size, large enterprises rose by 2 points, but small and medium enterprises (-8 points), export companies (-4 points), and domestic companies (-1 point) all showed declines. Team leader Kim said, "For SMEs, the impact of COVID-19 combined with a decrease in automobile parts sales led to a deterioration centered on the automobile industry." Large enterprises showed improvement due to a higher proportion of the electrical and telecommunications equipment industry, which saw better business conditions.

The non-manufacturing business conditions BSI in December was 68, down 5 points from the previous month, mainly due to declines in wholesale and retail trade (-15 points) and construction (-4 points).

The overall industry outlook BSI for the next month (70) fell 6 points. The manufacturing outlook BSI (77) dropped 4 points, and the non-manufacturing outlook BSI (64) decreased by 8 points. The economic sentiment index (ESI) for December recorded 82.5, down 6.6 points from the previous month, while the seasonally adjusted ESI cyclical component (86.3) rose by 3.3 points.

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