Changwon Chamber of Commerce, Q3 Economic Outlook 'Gradual Recovery Trend'

Despite Improved Sales Outlook, Profitability Expected to Recover Slowly
Risks in Second Half Include Exchange Rate and Raw Material Price Volatility, Corporate Burden Legislation, and Other Policy Risks

Business Outlook and Performance Index Chart for Companies in Changwon, Gyeongnam. [Image Source=Changwon Chamber of Commerce]

[Asia Economy Yeongnam Reporting Headquarters Reporter Lee Sang-hyun] It has been revealed that the recovery of the business sentiment among companies in the Changwon area of Gyeongnam is becoming a reality.

The Changwon Chamber of Commerce and Industry announced on the 30th that, based on a survey conducted from the 9th for 13 days targeting 182 manufacturing companies located in Changwon, the Business Survey Index (BSI) for the third quarter of this year was 106.0.

It exceeded the baseline (100) consecutively following the previous quarter. The actual performance BSI based on the results of the second quarter this year was surveyed at 101.6.

Following the previous quarter’s forecast BSI exceeding the baseline, the actual performance also showed a similar level, leading the Changwon Chamber to analyze that the overall recovery of business sentiment is becoming a reality.

However, when looking at the forecast BSI by survey item, except for sales at 112.1, other items such as operating profit at 97.8, facility investment at 92.9, and financing conditions at 86.8 all fell below the baseline.

While an increase in sales is expected, the Changwon Chamber interpreted that the environment to stably secure profitability is still not in place.

In fact, the results of the “Changwon Regional Business Environment Survey” conducted by the Changwon Chamber in May showed that although the order volume and production volume of local manufacturers improved, profitability rather deteriorated.

The reasons cited included rising international raw material prices, the expanded implementation of the 52-hour workweek, production disruptions due to difficulties in securing foreign workers caused by COVID-19, and increased maritime logistics costs.

By industry, sectors showing positive forecasts for the third quarter include machinery at 126.5, chemicals and refining at 122.2, automobiles and parts at 115.4, food and beverages at 114.3, and steel and metals at 110.5.

In the case of automobiles and parts, although the second quarter performance was 94.9, below the baseline, the third quarter forecast is expected to improve to 115.4, and machinery is expected to continue its strong performance with both actual and forecast at 126.5.

Across company size and sales type groups, the third quarter business sentiment forecast exceeded the baseline, with the groups driving the index increase being companies with 300 or more employees and export-oriented companies.

The forecast for companies with 300 or more regular employees was 118.5, higher than 103.9 for those with fewer employees, and export-oriented companies showed an index of 123.8, higher than 100.7 for domestic market-oriented companies.

When asked whether the first half of this year’s performance met the target set at the beginning of the year, 46.2% answered that they met or were close to the target, and 7.1% said they exceeded the target. On the other hand, 46.7% answered that they fell short.

Companies that answered they met or exceeded the target cited domestic market recovery at 37% and improvement in external conditions such as increased global demand at 34.1% as the main factors for achieving the target.

When asked about domestic and external risk factors expected to affect second half performance, exchange rate and raw material price volatility was the most cited at 32.1%, followed by policy risk at 20.6%, domestic market recession at 19.2%, intensification of protectionism such as US-China conflicts at 9.6%, and deterioration of financing conditions at 7.1%.

With growing expectations for collective quarantine, when asked how the market and technological environment will change after the end of COVID-19, 61.5% answered that it will gradually return to the previous situation after some time lag, and 7.1% said it would return quickly to the previous situation.

On the other hand, 15.9% answered that it will not return to the pre-COVID state and that market and technological changes will proceed gradually, and 15.4% predicted that the market and technological landscape will change significantly and rapidly, unlike before COVID-19.

A representative of the Changwon Chamber said, “The business sentiment of companies, which was greatly contracted last year, is gradually recovering,” and added, “Support measures for companies should be introduced more quickly on the ground so that companies can carry out production activities more flexibly.”

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