Corporate Sentiment Index Declines for 3 Consecutive Months... Manufacturing Hits Lowest Level Since February Last Year

The Bank of Korea: "Impact of Rising Raw Material Prices and Logistics Costs"

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Corporate sentiment continued to decline in March. The downturn was mainly seen in the manufacturing sector due to rising raw material prices and logistics costs caused by the Ukraine crisis.

According to the Bank of Korea's 'March 2022 Business Survey Index (BSI) and Economic Sentiment Index (ESI)' released on the 31st, the BSI for all industries this month recorded 83, down 2 points from the previous month, marking a decline for three 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. This index rose to 87 in December last year but has been declining for three consecutive months since January this year.

By industry, manufacturing recorded 84, down 7 points from the previous month, marking the lowest level since February last year. The decline was centered on automobiles (-24 points), other machinery and equipment (-13 points), and electronic, video, and communication equipment (-10 points).

The Bank of Korea explained, "The automobile sector showed a decline due to supply disruptions caused by shortages of vehicle semiconductors and other parts, as well as geopolitical risks. Other machinery and equipment declined due to rising raw material prices and production disruptions caused by the spread of variant viruses." By company size and type, large enterprises (-6 points), small and medium enterprises (-7 points), export companies (-10 points), and domestic companies (-5 points) all declined.

The BSI for non-manufacturing industries remained at 81, the same as the previous month. Professional, scientific, and technical services (+7 points) and transportation and warehousing (+7 points) increased, but information and communication (-3 points) and business facility management, support, and rental services (-3 points) declined, resulting in the same level of 81 as the previous month.

The April business outlook BSI declined for both manufacturing and non-manufacturing sectors. The manufacturing business outlook BSI recorded 85, down 8 points from the previous month, mainly due to automobiles (-25 points) and electronic, video, and communication equipment (-12 points). The non-manufacturing business outlook BSI showed 82, down 2 points from the previous month, mainly due to information and communication (-6 points) and wholesale and retail trade (-2 points).

Meanwhile, the March Economic Sentiment Index (ESI) fell 2.3 points from the previous month to 103.4. The ESI, centered around a long-term average of 100, indicates that when it exceeds 100, the economic sentiment of all private economic agents, including companies and households, is better than the past average.

The seasonally adjusted ESI cyclical component was 104.2, down 0.7 points.

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