Concerns Over Economic Recession Spread... Corporate Sentiment Declines for Two Consecutive Months

July Business Survey Index (BSI) and Economic Sentiment Index (ESI)
Concerns Over Economic Slowdown Rise Due to US Interest Rate Hike and Raw Material Price Increase

On the afternoon of the 11th, containers are stacked at Busan Port Sinsundae Pier. [Image source=Yonhap News]

As high inflation continues and concerns about economic slowdown grow due to interest rate hikes in major countries including the United States, the business sentiment among domestic companies has declined for the second consecutive month.

According to the "July Business Survey Index (BSI) and Economic Sentiment Index (ESI)" released by the Bank of Korea on the 28th, the BSI for all industries this month stood at 80, down 2 points from the previous month. This marks a decline for two consecutive months following last month.

The BSI is a statistic that surveys companies' judgments and outlooks on the current business situation; if negative responses outnumber positive ones, the index falls below 100.

This month, both manufacturing and non-manufacturing sectors showed poor economic outlooks.

The manufacturing sector's business condition BSI was 80, down 3 points from the previous month. The largest declines were seen in primary metals (-22 points), electronics, video, and communication equipment (-9 points), and chemicals and chemical products (-8 points). This was due to reduced demand amid concerns over economic slowdown and falling semiconductor prices.

Small and medium-sized enterprises (SMEs) experienced no change in business sentiment compared to the previous month, but large enterprises saw a significant drop (-6 points). By company type, both export companies (-5 points) and domestic companies (-1 point) declined.

Manufacturing companies cited rising raw material prices as the most challenging issue, followed by uncertain economic conditions and labor shortages with rising labor costs. The proportion of companies citing a high won-dollar exchange rate increased by 1.7 percentage points compared to the previous month.

(Data provided by Bank of Korea)

The non-manufacturing sector's business condition BSI recorded 80, down 2 points from the previous month, mainly due to declines in professional, scientific, and technical services (-5 points), wholesale and retail trade (-3 points), and construction (-2 points).

The Bank of Korea explained that orders for civil engineering design, supervision, and engineering decreased, consumer sentiment weakened, and burdens from exchange rates and logistics costs increased.

The business sentiment for next month is also expected to be unfavorable. The August manufacturing business outlook BSI fell 5 points from the previous month to 78, mainly due to declines in primary metals (-17 points) and electronics, video, and communication equipment (-9 points). Large enterprises, SMEs, export companies, and domestic companies all showed declines.

The August non-manufacturing business outlook BSI was 80, down 1 point from the previous month. The decline was particularly noticeable in wholesale and retail trade (-4 points) and construction (-3 points).

The July Economic Sentiment Index (ESI), which reflects both the BSI and the Consumer Sentiment Index (CSI), recorded 97.8, down 4.7 points from the previous month. An ESI below 100 indicates that the economic sentiment of all private economic agents, including companies and households, has worsened compared to the past average.

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