Vaccine-Driven Economic Recovery Optimism... SME Business Outlook Rises for Four Consecutive Months

Korea Federation of SMEs Announces 'May 2021 SME Business Outlook Survey'
May SBHI at 83.7, Up 3.2P from Previous Month...4 Consecutive Months of Increase
6 out of 10 Companies "Facing Difficulties Due to Domestic Demand Slump"

[Image source=AP Yonhap News]

[Asia Economy Reporter Junhyung Lee] Due to expectations of economic recovery from COVID-19 vaccinations, the business outlook for small and medium-sized enterprises (SMEs) has shown an upward trend for the fourth consecutive month.

The Korea Federation of SMEs announced on the 29th that the 'May 2021 SME Business Outlook Survey,' conducted from the 15th to the 22nd of this month targeting 3,150 SMEs, showed that the May Business Outlook Index (SBHI) was 83.7, an increase of 3.2 points from the previous month (80.5) and 23.7 points higher than the same month last year (60).

The SBHI indicates that if the index is above 100, more companies have a positive economic outlook. If it is below 100, the opposite is true.

Trend of Small and Medium Business Economic Outlook Index (SBHI). [Photo by Korea Federation of SMEs]

Despite the spread of COVID-19, the May SBHI maintained the 80-point range following last month’s 80.5. It has risen for four consecutive months: 69.3 in February, 76.2 in March, 80.5 in April, and 83.7 in May. The Korea Federation of SMEs explained that the maintenance of social distancing levels and expectations regarding vaccinations appear to have influenced this trend.

Specifically, the manufacturing sector’s May SBHI was 88.8, up 0.6 points from the previous month (88.2), while the non-manufacturing sector rose 4.5 points to 81 from 76.5 in the previous month.

By industry, 13 manufacturing sectors, including 'metal fabricated products,' 'apparel, accessories, and fur products,' and 'medical, precision, optical instruments and watches,' showed increases. Conversely, 9 sectors, such as 'printing and reproduction of recorded media' and 'automobiles and trailers,' declined.

In the non-manufacturing sector, construction rose 4.3 points to 84.2 from 79.9 in the previous month, and services increased 4.6 points to 80.4 from 75.8. Among service industries, 8 sectors including 'business facility management and business support services' and 'publishing, video, broadcasting, telecommunications, and information services' rose, while 2 sectors such as 'arts, sports, and leisure-related services' declined.

Management difficulties of small and medium-sized enterprises.
[Photo by Korea Federation of SMEs]

61.5% of SMEs responded that they experienced difficulties due to sluggish domestic demand this month. Other challenges cited included 'rising labor costs (41.1%),' 'excessive competition among companies (38.6%),' and 'rising raw material prices (33.7%).'

The average operating rate showed an upward trend. Last month, the average operating rate of small and medium-sized manufacturers was 70.9%, up 1.1 percentage points from the previous month (69.8%). By company size, small enterprises recorded 67.1%, up 1.4 percentage points from 65.7% the previous month, and medium enterprises rose 0.8 percentage points to 74.5% from 73.7%.

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