Corporate Sentiment Declines for 2 Consecutive Months Due to Omicron and Rising Costs

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[Asia Economy Reporter Seo So-jeong] Corporate sentiment continued to decline in February. The rapid spread of Omicron, supply disruptions, and rising costs led to a downturn mainly in the non-manufacturing sector.

According to the Bank of Korea's "February 2022 Business Survey Index (BSI) and Economic Sentiment Index (ESI)" released on the 23rd, the BSI for all industries this month recorded 85, down 1 point from the previous month, marking a decline for two consecutive months. The BSI is an indicator showing the business conditions perceived by companies; if the number of firms responding negatively exceeds those responding positively, the index falls below 100.

By sector, the non-manufacturing industry declined compared to the previous month, while manufacturing rose. Kim Dae-jin, head of the Corporate Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "Due to the spread of Omicron, supply disruptions, and rising costs, the non-manufacturing sector recorded 81, down 2 points from the previous month."

The manufacturing sector's business condition BSI in February rose 1 point from the previous month to 91. By company size and type, small and medium-sized enterprises (+1 point) and export companies (+2 points) showed increases. Kim said, "Although electrical equipment fell by 5 points, electronics, video, and communication equipment (+6 points) and automobiles (+6 points) rose, resulting in a 1-point increase from the previous month to 91."

The non-manufacturing sector's business condition outlook BSI rose in construction (+3 points) but fell in transportation and warehousing (-16 points) and wholesale and retail (-7 points), leading to a 2-point decrease from the previous month to 81.

The business condition outlook BSI for March rose in both manufacturing and non-manufacturing sectors.

Manufacturing increased by 3 points from the previous month to 93, and non-manufacturing rose by 2 points to 84. The manufacturing business condition outlook BSI recorded 93, up 3 points from the previous month, mainly driven by chemical products (+6 points) and electronics, video, and communication equipment (+5 points).

The non-manufacturing business condition outlook BSI rose 2 points from the previous month to 84, led by construction (+6 points) and wholesale and retail (+3 points).

Meanwhile, the economic sentiment index (ESI) for February rose 0.1 points from the previous month to 105.7. The ESI is centered around a long-term average of 100; a value above 100 indicates that the economic sentiment of all private economic agents, including businesses and households, is better than the past average. The cyclical component fell 0.1 points from the previous month to 106.7.

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