March SME Business Outlook Index 84.9... Rises for First Time in 3 Months Amid Social Distancing Easing

Korea Federation of SMEs Announces Economic Outlook Survey Results on 27th
7.7-Point Increase from Previous Month...20 Manufacturing Sectors Rise
Raw Material Outlook Deteriorates...Small and Medium Manufacturing Operating Rates Decline

[Asia Economy Reporter Kwak Min-jae] The Small and Medium Business Outlook Index (SBHI) for March recorded 84.9, marking a turnaround to an upward trend after three months.

The Korea Federation of SMEs conducted the March Small and Medium Business Outlook Survey from the 14th to the 21st, targeting 3,150 small and medium enterprises. As a result, it announced on the 27th that the index rose by 7.7 points compared to the previous month and by 8.7 points compared to the same month last year, reaching 84.9. This marks the first increase in three months since December last year (83.5).

An SBHI above 100 indicates that more companies responded positively than negatively, while below 100 indicates the opposite.

The Federation explained, "The easing of social distancing measures and the temporary suspension of mandatory entry logs at multi-use facilities are interpreted as having a positive impact on the overall industry's perceived business conditions."

The manufacturing sector's business outlook for March rose by 7.9 points from the previous month to 90.0. The non-manufacturing sector also increased by 7.6 points to 82.3, with the service industry rising by 9.2 points.

By industry, in manufacturing, 20 sectors showed increases, including beverages (73.3→97.6) and rubber products and plastics (71.4→91.2). Conversely, two sectors declined, including other transportation equipment (90.9→90.7) and furniture (88.0→79.2). In non-manufacturing, construction (77.5→76.6) fell by 0.9 points, but the service industry (74.2→83.4) rose by 9.2 points compared to the previous month. Particularly, the service industry saw increases in nine sectors centered on transportation (72.8→85.2) and wholesale and retail trade (73.7→84.3). Only one sector, educational services (80.0→77.7), declined.

Looking at the outlook by category across all industries, employment (94.1→94.3), which is a counter-cyclical indicator, is expected to slightly worsen compared to the previous month, but domestic demand (75.5→84.4), exports (87.4→92.2), operating profit (74.7→80.4), and financial conditions (77.3→81.2) all improved compared to the previous month.

Comparing the March SBHI with the average SBHI for the same month over the past three years, the manufacturing sector is expected to see a deterioration in raw material outlook. Except for this, overall business conditions, production, domestic demand, exports, operating profit, and financial conditions, as well as counter-cyclical indicators such as facilities, inventory, and employment, are all expected to improve compared to the average of the past three years. The non-manufacturing sector is also expected to improve in all categories.

In February this year, the biggest difficulty faced by small and medium enterprises was sluggish domestic demand (59.5%). This was followed by rising labor costs (48.9%), rising raw material prices (46.2%), and excessive competition among companies (39.6%).

Looking at recent trends in management difficulties for SMEs, the proportions of responses citing sluggish domestic demand (57.6→59.5), rising labor costs (48.6→48.9), rising raw material prices (43.5→46.2), and delayed collection of sales proceeds (16.9→17.1) have gradually increased, becoming chronic issues. Meanwhile, the proportion citing excessive competition among companies (41.0→39.6) has shown a slight decreasing trend.

The average operating rate of small and medium manufacturing enterprises in January was 72.3%, down 0.3 percentage points from the previous month but up 2.7 percentage points from the same month last year. By company size, small enterprises maintained a steady level at 68.7%, while medium enterprises fell by 0.6 percentage points to 75.7%. By company type, general manufacturing fell by 0.1 percentage points to 72.0%, and innovative manufacturing dropped by 1.9 percentage points from the previous month to 73.5%.

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