SME Economic Outlook Declines for Two Consecutive Months... "Surge in Raw Material Prices Amid COVID-19"

Korea Federation of SMEs Announces Results of 'July SME Business Outlook Survey'
Down 1.6 Points from Previous Month to 78.9... 'Domestic Demand Slump' Challenges

[Image source=Yonhap News]

[Asia Economy Reporter Kim Bo-kyung] As raw material prices rise and shipping and logistics difficulties persist, the Small and Medium Business (SMB) business outlook index has declined for two consecutive months.

The Korea Federation of SMEs announced on the 29th that the business outlook index (SBHI) for this month’s business conditions forecast, conducted in the 'July SMB Business Outlook Survey,' stood at 78.9, down 1.6 points from the previous month. This marks the second consecutive month of decline in the business outlook index following last month.

An official from the Federation of SMEs stated, "Due to the sharp rise in raw material prices and ongoing shipping and logistics difficulties, the perceived business conditions are expected to slow down." Despite vaccination efforts and the restructuring of social distancing measures, the number of confirmed COVID-19 cases continues to show significant fluctuations, indicating that the pandemic situation remains unstable.

The manufacturing sector’s business outlook for July was 85.5, down 0.7 points from the previous month, while the non-manufacturing sector fell 2.0 points to 75.5. The construction industry (78.9) dropped 2.3 points from the previous month, and the service industry (74.8) decreased by 2.0 points.

Within manufacturing, nine industries including furniture, food products, and other products saw increases, whereas thirteen industries such as medical substances and pharmaceuticals, electronic components, computers, audiovisual and communication equipment experienced declines.

In the non-manufacturing sector, construction (78.9) fell by 2.3 points, and services (74.8) decreased by 2.0 points compared to the previous month.

Within the service industry, five sectors including accommodation and food services, and educational services showed increases, while five sectors centered on arts, sports, and leisure-related services declined.

The main difficulties faced by SMBs this month were dominated by sluggish domestic demand (59.4%), followed by excessive competition among companies (41.3%), rising raw material prices (40.7%), and increased labor costs (38.8%).

While the proportions of responses citing sluggish domestic demand and rising labor costs decreased compared to the previous month, those citing delayed payment collection, excessive competition among companies, and rising raw material prices increased.

The average operating rate of small and medium manufacturing enterprises in May was 71.1%, unchanged from the previous month and up 4.9 percentage points compared to the same month last year.

Meanwhile, this survey was conducted from the 15th to the 22nd of this month, targeting a total of 3,150 SMBs, including 1,500 manufacturing and 1,650 non-manufacturing companies.

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