Corporate Business Outlook Declines for 14 Consecutive Months... Semiconductor Industry Conditions Most Severe

May BSI Outlook at 93.8... 14 Consecutive Months of Sluggish Performance

Companies have issued negative economic outlooks for 14 consecutive months.

On the 25th, the Federation of Korean Industries (FKI) conducted a Business Survey Index (BSI) on 600 major companies based on sales revenue, and the BSI outlook for May recorded 93.8. The BSI uses 100 as the baseline; a value above 100 indicates a positive economic outlook compared to the previous month, while a value below 100 signifies a negative economic outlook. The BSI outlook has remained below the baseline of 100 for 14 consecutive months since April last year (99.1). This 14-month streak of downturn is the longest since February 2021.

The actual BSI for April 2023 was 92.2, marking 15 consecutive months of downturn since February last year (91.5), indicating a prolonged deterioration in corporate performance.

By industry, the May BSI for manufacturing (94.1) and non-manufacturing (93.3) both fell below the baseline of 100 for 12 consecutive months since June 2022, showing simultaneous sluggishness. This simultaneous 12-month downturn in both manufacturing and non-manufacturing sectors is the first occurrence since October 2020.

Among manufacturing sub-industries, the electronics and telecommunications equipment BSI (72.2), which includes semiconductors, recorded its lowest level in 2 years and 7 months since October 2020 (71.4), showing the worst economic outlook among surveyed industries. Considering the deepening negative outlook in electronics and telecommunications equipment, the recent production slump is likely to continue for some time. On the other hand, general and precision machinery and equipment (119.0), wood, furniture, and paper (111.1), and food, beverages, and tobacco (110.0) sectors exceeded the baseline of 100.

Among non-manufacturing sub-industries, leisure, accommodation, and dining (107.1) was the only sector to record a BSI above 100. Electricity, gas, and water supply (82.4) showed the weakest business outlook among non-manufacturing sectors. The FKI estimated that the negative outlook in electricity, gas, and water supply was influenced by the postponement of the announcement of the second-quarter electricity and gas rate hike plan, which was scheduled for the 31st of last month.

Meanwhile, the May BSI by survey category showed negative outlooks across all sectors: ▲Investment 93.0, ▲Profitability 93.2, ▲Financial Conditions 93.5, ▲Exports 94.3, ▲Domestic Demand 96.6, ▲Employment 97.1, and ▲Inventory 104.4. In particular, domestic demand (96.6), exports (94.3), and investment (93.0) have simultaneously been sluggish for 11 consecutive months since July 2022.

Choo Kwang-ho, head of the Economic and Industrial Department at FKI, stated, “The prolonged negative economic outlook centered on key manufacturing sectors such as semiconductors could intensify the recessionary pressure on our economy. Considering the worsening corporate performance, it is necessary to moderate the pace of minimum wage increases and refrain from discussing legislative bills that could hamper corporate activities, such as the amendment to the Labor Union Act (known as the ‘Yellow Envelope Act’).”

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