SMEs "High Inflation, High Interest Rates, High Exchange Rates... August Economic Outlook Darker"

August Gyeonggi Outlook Index at 78.5, Down 3 Points from Previous Month

[Asia Economy Reporter Donghyun Choi] Small and medium-sized enterprises (SMEs) view the business conditions in August negatively due to the 'three highs' crisis of high inflation, high interest rates, and high exchange rates.

According to the 'August 2022 SME Business Outlook Survey' conducted by the Korea Federation of SMEs from the 14th to the 21st of last month targeting 3,150 SMEs, the August Business Outlook Index (SBHI) fell by 3 points from the previous month to 78.5. This marks the third consecutive month of decline since May, when it recorded the highest level since the outbreak of COVID-19 at 87.6.

By industry group, the manufacturing sector's August business outlook dropped 6.8 points from the previous month to 77.6. The non-manufacturing sector decreased by 1.1 points to 78.9. Construction rose by 1.6 points to 78.7, while the service sector fell by 1.7 points to 78.9 compared to the previous month.

Among manufacturing industries, 5 out of 22 sectors showed an increase compared to the previous month, led by Apparel, Apparel Accessories, and Fur Products (up 5.7 points) and Textile Products (up 3 points). The largest declines were seen in Automobiles and Trailers (-14.6 points) and Food Products (-13.9 points).

In the non-manufacturing sector, construction increased by 1.6 points from the previous month, while services decreased by 1.7 points. Notably, within services, Publishing, Video, Broadcasting and Telecommunications, and Information Services, as well as Education Services, showed increases compared to the previous month. Accommodation and Food Services experienced the largest drop of 12 points despite the summer peak season, due to the resurgence of COVID-19.

Employment outlook recorded 94.2, indicating a slight improvement from the previous month. Conversely, forecasts for domestic sales (81.6 → 79.3), exports (89.5 → 85.7), operating profits (78.2 → 76.2), and financial conditions (79.7 → 79.1) are expected to worsen compared to the previous month.

The main difficulties faced by SMEs were dominated by sluggish domestic demand (59%). This was followed by rising raw material prices (49.5%), increased labor costs (47.3%), excessive competition among companies (32.0%), and rising logistics costs and transportation difficulties (29.5%).

Examining the month-to-month change rates in management difficulties, the seasonal off-season (10.3 → 15.1) showed the largest increase. This was followed by rising labor costs (42.7 → 47.3), high interest rates (14.6 → 18.6), and sluggish domestic demand (55.8 → 59.0).

As of June, the average operating rate of small and medium-sized manufacturing enterprises was 72.5%, down 0.2 percentage points from the previous month but up 0.9 percentage points compared to the same month last year.

A representative from the Korea Federation of SMEs stated, "With the external environment unstable due to high inflation, high interest rates, and high exchange rates, coupled with concerns over the resurgence of COVID-19 and reduced working days during the summer vacation period in July, the perceived business climate for SMEs in August is expected to cool somewhat."

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