SME Economic Outlook Rebounds After 4 Months... "Expectations for 5th Disaster Relief Fund"

September Small Business Business Outlook Index 78... Up 4.4P from Previous Month
Three Consecutive Months of Decline Until Last Month... Rebound Due to Expanded Vaccine Inoculation
Employment Outlook Worsens... "Uncertain Whether Recovery Will Continue"

July Exports Reach Record High. Busy Busan Port
(Busan=Yonhap News) Reporter Kang Deok-cheol = The Ministry of Trade, Industry and Energy announced on the 1st that the export amount in July recorded 55.44 billion dollars, an increase of 29.6% compared to the same period last year. This monthly export amount is the highest in 65 years since trade statistics began to be compiled in 1956. The photo shows the view of Sinsundae Pier at Busan Port on the afternoon of the 2nd. 2021.8.2
kangdcc@yna.co.kr
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[Asia Economy Reporter Lee Junhyung] The Small and Medium Business (SMB) Business Outlook Index rebounded after four months. This reflects expectations for expanded COVID-19 vaccinations and the disbursement of the 5th disaster relief fund.

The Korea Federation of SMEs announced on the 29th that the Small and Medium Business Outlook Survey for September 2021, conducted from the 17th to the 24th of this month targeting 3,150 SMBs, showed that the Business Outlook Index (SBHI) for the next month rose 4.4 points to 78 compared to the previous month (73.6). Compared to the same month last year (67.9), it increased by 10.1 points. An SBHI above 100 means more companies view the economy positively than negatively. Below 100 means the opposite.

Previously, the SMB SBHI had declined for three consecutive months from June to last month due to a combination of factors including soaring raw material prices, logistics disruptions, and the 4th wave of COVID-19. However, as COVID-19 vaccinations increased and the 5th disaster relief fund was distributed, economic expectations improved, leading to the SBHI rebounding after four months. Nevertheless, the Korea Federation of SMEs explained that it is uncertain whether the economic recovery trend will continue due to the prolonged COVID-19 situation caused by the spread of the Delta variant.

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

Specifically, the manufacturing sector's SBHI for September was 83.1, up 2.5 points from the previous month (80.6). The non-manufacturing sector rose 5.3 points to 75.3 from 70 the previous month. Construction was 76.9, up 1 point from 75.9, and services increased 6.1 points to 74.9 from 68.8.

Within manufacturing, 15 industries showed an upward trend, including 'Printing and Recorded Media Reproduction' rising from 57.4 to 75.5, and 'Food Products' increasing from 86.4 to 100.3. Conversely, 7 industries declined, such as 'Leather Bags and Footwear' dropping from 63.4 to 54.6, and 'Electrical Equipment' falling from 83.6 to 76.9.

Among non-manufacturing, the service sector saw significant growth in 'Wholesale and Retail Trade,' which benefits from the Chuseok holiday demand, rising from 67.4 to 75.8. Additionally, six industries showed recovery, including 'Arts, Sports, and Leisure-related Services,' which increased from 63.4 to 70.4. However, four industries declined, such as 'Educational Services' dropping from 72.6 to 59.8, and 'Real Estate and Rental Services' decreasing from 74.9 to 67.7.

The employment outlook worsened to 95.5 from 95 last month. The employment level SBHI is considered an inverse indicator, decreasing when the economy recovers and increasing when it worsens.

Comparing this month's SMB SBHI with the same month over the past three years, manufacturing showed higher-than-average outlooks in all areas except raw materials, including production, domestic demand, exports, financial conditions, facilities, inventory, and employment outlook. Conversely, non-manufacturing showed deteriorated outlooks in all areas except financial conditions.

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

Six out of ten SMBs (63.2%) cited 'domestic demand slump' as the main management difficulty last month. This was followed by 'rising labor costs (41.9%)', 'excessive competition among companies (40.2%)', and 'rising raw material prices (40%)'.

The average operating rate of small and medium manufacturing companies in July was 70.9%, down 0.7 percentage points from 71.6% in the previous month. By company size, small enterprises had an operating rate of 65.5%, down 0.7 percentage points from 67.2%, and medium enterprises had 75.1%, down 0.7 percentage points from 75.8%.

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