Economic Sentiment Remains 'Frozen' Next Year... Negative Economic Outlook for 9 Consecutive Months

Manufacturing and Non-Manufacturing Sectors Lag for 8 Consecutive Months
Domestic Demand, Exports, and Investment Worsen for 7 Consecutive Months
Semiconductors Including Electronics Face Worst in 2 Years and 3 Months

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] Companies surveyed expect that economic recovery will remain difficult next year. There is a strong call for government and political support in areas such as tax benefits, financial market stability, and deregulation.

The Federation of Korean Industries (FKI) announced on the 26th that the Business Survey Index (BSI) for the top 600 companies by sales recorded a forecast value of 88.5 for next month. This is below the baseline of 100, which indicates an equal number of positive and negative responses regarding economic outlook. It has remained below 100 for nine consecutive months since April (99.1). The forecast rose by 3.1 points from last month’s 85.4, which was the lowest in two years and two months. The actual performance index for last month was 85.7, marking 11 consecutive months of negative outlook since February (91.5). This indicates a prolonged decline in corporate performance.

Both manufacturing and non-manufacturing sectors failed to escape the downward trend. The manufacturing BSI stood at 86.9, and the non-manufacturing BSI at 90.3. Both have been below the baseline for eight consecutive months since June.

In manufacturing, all sectors except pharmaceuticals (100) fell below the baseline. The electronics and telecommunications sector, which includes semiconductors, recorded 77.8, the lowest in two years and three months since October 2020 (71.4). It has declined for four consecutive months: October (95), November (90), December (84.2), and January (77.8). The data confirms the trend of "economic recession → inventory increase → operating rate decline." According to Statistics Korea, the average operating rate in manufacturing was 72.4% in October, down 2.7 percentage points from September.

Among non-manufacturing sub-industries, construction had the lowest outlook at 73.8, reflecting poor results due to falling housing prices. This is a slight recovery from last month’s outlook of 66.7, which was the lowest in two years and seven months. The outlook for electricity, gas, and water supply (113.3) rose, likely due to expectations of an electricity rate increase decision at the end of this month.

Among the BSI categories surveyed, the outlook for financial conditions was the lowest at 86.3. This indicates that companies feel burdened when raising funds in financial markets due to interest rate hikes. Not only financial conditions but also investment (87.9), profitability (90.1), exports (90.7), domestic demand (90.9), employment (93.4), and inventory (104.9) all showed weak figures. Inventory is considered a negative outlook if it exceeds 100. All categories have remained weak for four consecutive months since October. In particular, domestic demand, exports, and investment have simultaneously been weak for seven consecutive months since July.

Choo Kwang-ho, head of the FKI Economic Department, said, "Companies are facing a complex crisis where export demand is declining as the global economy slows down and domestic demand is freezing." He added, "The government must ease tax burdens and stabilize financial markets to relieve liquidity pressure on companies," and emphasized, "It is also necessary to improve unnecessary regulations to invigorate the private economy."

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