Corporate Sentiment Stretches... Highest in 10 Years

Impact of Vaccine Optimism on Global Economic Recovery
March All-Industry Business Survey Index (BSI) at 83, Up 7 Points in One Month
Improved April Business Outlook Amid Consumer Sentiment Recovery
Clear Recovery in All Industry Activities Led by Semiconductors

[Asia Economy Reporter Eunbyeol Kim, Sejong=Reporter Son Seonhee] The business sentiment experienced by companies has surged to the highest level in 9 years and 8 months. Although the spread of COVID-19 continues, rapid vaccine rollout and the recovery of the global economy have raised expectations that the economy, led by export companies, will revive. The economic sentiment index, which reflects both business and consumer sentiment, has also recovered to pre-COVID-19 levels. The increase in industrial production last month was the largest in 8 months. Even considering only the economic indicators confirmed in January and February, the first quarter GDP growth rate is expected to be positive, marking three consecutive quarters of growth. This means recovering the GDP lost due to the COVID-19 shock last year.

According to the ‘March 2021 Business Survey Index (BSI) and Economic Sentiment Index (ESI)’ released by the Bank of Korea on the 31st, the BSI for all industries this month was 83, up 7 points from the previous month, marking the highest level since July 2011 (87). The manufacturing BSI was also the highest since July 2011, and the non-manufacturing BSI was the highest since December 2019 (78), before the COVID-19 outbreak. The BSI for the outlook of all industries next month also rose 6 points to 84, indicating that the improvement in business sentiment is expected to continue for the time being. The ESI, which reflects consumer sentiment as well, rose 4.7 points from the previous month to 101.3, the highest since May 2018 (101.9).

The economic recovery trend was also prominent in industrial activity. Total industrial production, which had contracted by -0.6% in January, turned to a 2.1% increase last month as production in both manufacturing and services improved. In particular, manufacturing production rose 4.3% month-on-month, driven by semiconductors (7.2%) and chemical products (7.9%). The average operating rate of manufacturing also reached 77.4%, the highest in 6 years and 7 months.

Professor Kyungsoo Kim, Emeritus Professor at Sungkyunkwan University, evaluated, "The pattern of exports increasing first, followed by domestic demand improvement, is similar in other countries, and it is positive that exports and industrial production are showing strong performance for now." However, he added, "There are clearly hurdles, such as a resurgence of COVID-19 spread or delays in the vaccination schedule," and emphasized, "The government should pay attention to prevent becoming like Europe, where vaccination schedules have been delayed." The recovery of the sentiment index to pre-COVID-19 levels means that investment and production can increase, but for actual domestic demand recovery, vaccine rollout must be accelerated.

The economy is expected to grow positively in the first quarter. According to Bloomberg’s survey of 42 investment banks (IBs), the growth rate for the first quarter is expected to be 0.8%. This marks three consecutive quarters of positive growth, representing about 0.9% growth compared to the same period last year. Bloomberg’s forecast for Korea’s annual growth rate this year is 3.4%. Earlier, the International Monetary Fund (IMF) revised Korea’s growth forecast upward from 3.1% to 3.6%.

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