Worst Sentiment in Business Conditions... December Corporate Business Outlook Hits Lowest in 2 Years and 2 Months

FKCCI 'December Business Survey Index (BSI) of 600 Major Companies'
"Weakness in Electronics and Telecommunications Including Semiconductors... Expected to Lead to Decline in Export Performance"

Last May, a researcher showcased an MPW test chip in the 12-inch semiconductor testbed cleanroom at the Daejeon Nano Convergence Technology Institute. Photo by Jinhyung Kang, Daejeon aymsdream@

[Asia Economy Reporter Moon Chaeseok] Corporate economic outlooks have been found to be the worst since 2 years and 2 months ago, when COVID-19 was at its peak.

The Federation of Korean Industries (FKI) announced on the 22nd that the Business Survey Index (BSI) outlook for next month was 85.4, based on a survey of 600 major companies nationwide. This figure is well below the baseline of 100, which indicates that positive responses about the economic outlook outnumber negative ones. The outlook of 85.4 is the lowest in 2 years and 2 months since October 2020 (84.6), when the COVID-19 pandemic was at its height. It has been below the baseline of 100 for nine consecutive months since April (99.1).

Both manufacturing and non-manufacturing sectors have not escaped the downward trend. The manufacturing BSI stood at 83.8, and the non-manufacturing at 87.3. Both have been below the baseline for seven consecutive months since June.

In manufacturing, all sectors except general and precision machinery and equipment (117.6), which includes nuclear power and shipbuilding equipment, fell below the baseline. Non-metallic minerals (73.3) dropped sharply by 14.9 points compared to the previous month, and petroleum and chemicals (71.0) fell by 11.8 points.

Notably, the outlook for electronics and telecommunications (84.2), which includes semiconductors and accounts for about one-third of Korea's exports, also failed to recover. It declined by 5.8 points compared to the previous month. Following last month’s (95) and this month’s (90) outlooks, it has been below the baseline for three consecutive months. This is the first time in 2 years and 1 month since November 2020 that it has been sluggish for three consecutive months. Regarding this, the FKI expressed concern, stating, "The outlook for the electronics and telecommunications sector, which includes semiconductors, has been sluggish for three consecutive months," and added, "(Since this sector) accounts for about one-third of Korea's exports, it is expected to lead to a slowdown in domestic export performance."

Among non-manufacturing sectors, the construction industry's outlook (74.4), the lowest, received its worst score in 2 years and 7 months since May 2020 during the COVID-19 pandemic. Struggling with a triple burden of a sluggish sales market, rising construction costs, and difficulties in financing, it fell 13.4 points from this month's outlook (87.8). With housing purchase sentiment weakened, it is expected to be difficult to recover from the slump in the near term. According to the Ministry of Land, Infrastructure and Transport, as of the end of September, the number of unsold houses nationwide was 41,604, a 27.1% increase from the end of August.

Among the BSI categories surveyed, the outlook for financial conditions was the lowest at 86.8. This is interpreted as being influenced by the rise in the base interest rate and tightening of the short-term money market. It indicates that companies feel a significant burden in raising funds in the financial market.

Choo Kwang-ho, head of the FKI Economic Headquarters, said, "Companies are suffering from difficulties such as production cost pressures due to high inflation and high interest rates, and sales declines and inventory increases caused by domestic and international economic contractions," adding, "It is necessary to adjust the pace of base interest rate hikes to help improve corporate financial conditions and to promptly pass the government's corporate tax cut bill pending in the National Assembly."

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