March SME Economic Outlook Rebounds After 5 Months... 'Chemicals Up, Apparel Down'

Kim Ki-moon, President of the Korea Federation of Small and Medium Business.

The Small and Medium Business Index (SBHI) for March rebounded after five months, recovering to the 80-point range.

The Korea Federation of SMEs announced on the 27th that the 'March SBHI,' calculated from a survey of 3,150 small and medium enterprises conducted from the 14th to the 21st, stood at 83.1. After four consecutive months of decline since October last year (85.1), it successfully rebounded. Compared to the same month last year, it fell by 1.8 points, but rose by 5.5 points compared to the previous month. The business outlook index uses 100 as the baseline; a score of 100 or below indicates that more companies expect the economy to worsen, while a score above 100 indicates the opposite.

The manufacturing sector's business outlook for March was 86.5, up 5.4 points from the previous month, while the non-manufacturing sector rose 5.4 points to 81.5. Construction (82.8) increased by 8.5 points month-on-month, and services (81.3) rose by 4.8 points.

Within manufacturing, 19 industries saw month-on-month increases, led by chemicals and chemical products (up 20.8 points), non-metallic mineral products (up 14.6 points), and beverages (up 13.7 points). Conversely, four industries declined, including apparel, clothing accessories, and fur products (down 8.3 points), medical substances and pharmaceuticals (down 5.6 points), and furniture (down 2.9 points).

In non-manufacturing, construction (74.3→82.8) rose 8.5 points month-on-month due to the end of the winter off-season, and services (76.5→81.3) increased by 4.8 points. Except for publishing, video, broadcasting, telecommunications, and information services (down 2.1 points), nine service industries, including business facility management, business support, and rental services (up 7.7 points), showed increases.

Comparing this March's SBHI with the past three years' March averages, the manufacturing sector's export and financial condition outlooks worsened, while overall economy, production, domestic demand, operating profit, and raw material outlooks, which are inversely related to equipment, inventory, and employment outlooks, are expected to improve compared to the three-year average. In non-manufacturing, export outlooks deteriorated, but other categories showed slight improvements.

Last month, the biggest difficulty faced by SMEs was sluggish domestic demand (60.5%). This was followed by rising labor costs (55.2%), increasing raw material prices (41.4%), excessive competition among companies (34.3%), and high interest rates (28.9%).

Regarding management difficulties, the proportion of responses citing delayed collection of sales proceeds (19.2→16.2) and rising labor costs (55.5→55.2) decreased compared to the previous month. In contrast, responses citing rising raw material prices (39.5→41.4), excessive competition among companies (33.5→34.3), sluggish domestic demand (60.0→60.5), and high interest rates (28.6→28.9) increased.

As of January, the average operating rate of small and medium manufacturing enterprises was 70.5%. This was a 1.5 percentage point decrease from the previous month and a 1.8 percentage point decrease compared to the same month last year. By company size, small enterprises recorded 66.9%, down 2.3 percentage points month-on-month, and medium enterprises recorded 74.6%, down 0.5 percentage points month-on-month.

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