Hankyung Research Institute "Corporate Sentiment Slightly Contracted, Non-Manufacturing Below 100 Line"

June BSI Outlook at 102.6 Shows Slowdown Since Last March
Non-Manufacturing Sector Forecasts Economic Slump at 99.4

[Asia Economy Reporter Kim Heung-soon] It has been identified that the corporate sentiment, which had been on the rise due to factors such as COVID-19 vaccine supply, is somewhat contracting due to external factors like raw material supply shortages.

The Korea Economic Research Institute (KERI) under the Federation of Korean Industries announced on the 24th that the June composite Business Survey Index (BSI) outlook for 600 major companies by sales recorded 102.6, down 5.1 points from the previous month. Although the index exceeded the baseline of 100 for four consecutive months since March, the decline in the index value from the previous month suggests that the economic uptrend may somewhat slow down.

A BSI above the baseline of 100 indicates that positive responses outnumber negative ones, while a BSI below 100 means negative responses are more prevalent. The actual composite BSI for May was 106.4, showing a favorable trend, but it declined for two consecutive months (April -1.9p, May -4.6p) following the previous month.

KERI explained, "The BSI outlook has been gradually declining since peaking at 109.2 in March, and considering that the June BSI outlook for non-manufacturing sectors such as services fell below the baseline to 99.4, signs of instability have recently appeared in the economic uptrend."

By industry, the June BSI outlook for manufacturing was 105.1, but non-manufacturing was 99.4, indicating expected economic downturn compared to the previous month. KERI added, "Non-manufacturing fell below the 100 baseline again after surpassing it at 102.9 in March, three months ago. It is observed that concerns over weakening face-to-face service demand due to vaccine supply uncertainties, intensified competition in sectors centered on distribution and transportation, and seasonal factors such as decreased demand for city gas have negatively affected corporate sentiment."

Looking at the June outlook by sector: domestic demand (102.3), exports (100.5), investment (103.8), employment (105.1), financial conditions (102.1), profitability (99.0), and inventory (98.2). Domestic demand outlook has declined for three consecutive months since March, and exports also sharply dropped by 5.3 points from the previous month, indicating a slowdown in the favorable trend.

However, investment slightly increased by 2.2 points compared to the previous month. KERI analyzed, "Expectations for expanded support for investment in new industries and new technologies such as semiconductors positively influenced corporate investment sentiment."

KERI also stated that manufacturing companies are currently under significant pressure due to global raw material and component supply disruptions. The profitability outlook for manufacturing plunged below the 100 baseline to 98.1, down 8.5 points, and inventory (96.8) recorded the lowest level in 19 years since May 2002 (93.1). KERI interpreted, "Generally, a BSI below 100 for inventory is a positive signal, but the recent low figures seem to reflect difficulties in maintaining appropriate inventory levels due to logistics and supply shortages."

The actual BSI for May was 106.4, slightly down 4.6 points from the previous month but still above the baseline. All sectors also exceeded the baseline: domestic demand (105.6), exports (101.0), investment (102.6), employment (107.9), financial conditions (103.8), profitability (103.1), and inventory (98.2).

Choo Kwang-ho, Director of Economic Policy at KERI, emphasized, "Corporate sentiment in major sectors such as domestic demand and exports has somewhat contracted, indicating a possible slowdown in the economic uptrend. It is necessary to establish a comprehensive government-level strategy to resolve uncertainties such as raw material supply shortages and global supply chain restructuring."

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