Corporate Sentiment Hits Worst in 23 Months Amid Ongoing Inflation and Economic Uncertainty (Comprehensive)

BSI 75 Down 1 Point from Previous Month
Manufacturing Up 2 Points
Non-Manufacturing Down 3 Points

[Asia Economy Reporter Seo So-jeong] As inflation and economic uncertainty persist, corporate sentiment has worsened to its lowest level in 23 months. Domestic demand sluggishness has dampened consumer sentiment, and the decline in the housing market has led to a drop in non-manufacturing corporate sentiment, causing the overall sentiment among domestic companies to deteriorate for three consecutive months.

According to the Business Survey Index (BSI) for November released by the Bank of Korea on the 23rd, the BSI for all industries this month stood at 75, down 1 point from October's 76. This is the lowest level in 23 months since December 2020 (75).

The BSI is a statistic that surveys companies' judgments and outlooks on current business conditions; if negative responses outnumber positive ones, the index falls below 100. The overall industry BSI had declined for two consecutive months since May (86), then slightly rose in August (81), but fell again in September (78) and has continued to decline for three consecutive months.

By sector, manufacturing sentiment improved compared to the previous month, but the deterioration in non-manufacturing caused the overall index to fall. The manufacturing BSI for November was 74, up 2 points from the previous month. The demand for jet fuel increased due to the recovery of global travel demand, leading to a significant rise in petroleum refining and coke (+12 points). The expansion of new materials such as secondary batteries and diversification of profitability improved business conditions, raising chemicals and products (+11 points). Seasonal demand for electrical equipment such as power supply devices also increased, boosting electrical equipment (+11 points) and related sectors.

Manufacturing companies cited uncertain economic conditions (22.7%) as their biggest management difficulty, followed by rising raw material prices (18.5%) and sluggish domestic demand (11.4%). The proportion citing uncertain economic conditions rose by 2.9 percentage points from the previous month, while the share of exchange rate concerns fell by 4.2 percentage points to 8.3%.

The non-manufacturing BSI for November was 76, down 3 points from the previous month. This is the lowest level in 21 months since February last year (72). Retail and wholesale trade declined (-5 points) as consumer sentiment weakened due to sluggish domestic demand. In particular, business support and rental services fell sharply (-7 points) due to decreased equipment rental demand caused by the sluggish construction market. Construction (-4 points) also declined as business viability decreased amid housing market slowdown and liquidity deterioration. The construction BSI stood at 64, the lowest level in 26 months since September 2020 (60).

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