Corporate Sentiment Ice Age... November BSI Hits 'Lowest Level' in 25 Months

FedChamber, BSI Survey on Top 600 Companies by Sales
Manufacturing and Non-Manufacturing Both Sluggish for 6 Consecutive Months
"Need to Adjust Interest Rate Hike Speed, Pass Corporate Tax Cut Bill, etc."

[Provided by the Federation of Korean Industries]

[Asia Economy Reporter Han Yeju] The business sentiment index of companies has recorded its lowest level in 25 months.

According to a survey conducted by the Federation of Korean Industries (FKI) on the 600 largest companies by sales on the 25th, the Business Survey Index (BSI) outlook for November stood at 86.7.

The November BSI outlook is the lowest in 25 months since October 2020 (84.6), and has remained below the baseline of 100 for eight consecutive months since April this year (99.1). A BSI above 100 indicates a positive business outlook compared to the previous month, while a BSI below 100 indicates a negative outlook.

The actual BSI for October also recorded 90.3, showing a negative outlook for nine consecutive months since February this year (91.5), indicating a prolonged deterioration in corporate performance.

By industry in November, the BSI for manufacturing (84.0) and non-manufacturing (89.7) both showed sluggish performance for six consecutive months since June this year. This is the first time in 25 months since October 2020 that both manufacturing and non-manufacturing sectors have recorded a negative outlook for six months or more simultaneously.

In manufacturing, no sector exceeded the baseline of 100 for the second consecutive month. In particular, as the global economic recession becomes more apparent, the two leading domestic export sectors, electronics and telecommunications (including semiconductors) and automobiles and other transportation, recorded 90.0 and 89.7 respectively, showing negative performance for two consecutive months. The November outlook itself fell by 5.0 points and 7.1 points respectively compared to the previous month. The FKI expects that the recent slowdown in domestic export performance will worsen due to the continued bleak outlook for export-driven sectors.

Among non-manufacturing sectors, only the electricity, gas, and water sector (106.3), which experienced price increases in electricity and gas from October, showed a positive outlook, while the other non-manufacturing sectors remained below the baseline of 100. In particular, the outlook for the leisure, accommodation, and dining sector (88.9), which recorded the highest increase in dining prices in 30 years and 2 months since July 1992, showed the largest decline of 22.2 points compared to the previous month.

The BSI by survey category in November showed negative outlooks across all sectors (▲financial conditions 90.0 ▲profitability 90.9 ▲investment 93.4 ▲exports 93.9 ▲domestic demand 95.6 ▲employment 98.1 ▲inventory 103.0), indicating a worsening trend for two consecutive months following October. In particular, due to the rise in benchmark interest rates, corporate bond yields, and stock price declines, financing conditions in direct and indirect financial markets have become unfavorable, with financial conditions (90.0) showing the weakest outlook.

Choo Kwang-ho, head of the FKI Economic Headquarters, stated, "Companies are already facing a serious management crisis characterized by sales slowdown, inventory increase, and worsening financial conditions as the domestic and international economic recession intensifies. With global tightening, prolonged Russia-Ukraine conflict, and US-China disputes, future difficulties are likely to deepen." He added, "To prevent a sharp decline in corporate sentiment, it is necessary to adjust the pace of interest rate hikes, promptly pass the corporate tax reduction bill pending in the National Assembly, and strengthen tax incentives to encourage investment."

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