Decline in Corporate Sentiment This Month Due to China Risk and Semiconductor Slump... Increased Economic Uncertainty

Delayed Export Recovery Amid Global Economic Slowdown

As risks originating from China increase economic uncertainty, corporate sentiment worsened this month compared to the previous month. In particular, the decline in semiconductor exports, a key industry, continued and price recovery was delayed, leading to a larger drop centered on manufacturing.

According to the August Business Survey Index (BSI) results released by the Bank of Korea on the 23rd, the BSI for business conditions across all industries this month recorded 71, down 3 points from the previous month. This index reflects business owners' judgments and outlooks on current business conditions, and a value below 100 indicates poor business conditions.

By industry, the manufacturing BSI fell 5 points from the previous month to 67, marking a decline for two consecutive months. This is the lowest level in six months since February (63). Specifically, delayed semiconductor price recovery and reduced orders caused the electronics, video, and communication equipment sector (-8 points) to decline, while the primary metals sector (-12 points) dropped due to weakened price competitiveness caused by sluggish steel demand in China and increased supply. The perceived business conditions for chemical substances and products (-8 points) worsened as the recovery of domestic demand in China was slower than expected and concerns over increased supply grew.

By company size and type, small and medium-sized enterprises (SMEs) experienced the largest decline (-8 points), while large enterprises (-2 points), export companies (-4 points), and domestic market companies (-5 points) all saw decreases.

Hwang Hee-jin, head of the Bank of Korea's Statistics and Survey Team, said, "The business condition BSI for SMEs engaged in semiconductor equipment and substrate manufacturing in the electronics, video, and communication equipment sector deteriorated significantly."

The non-manufacturing BSI also fell by 1 point from the previous month to 75, marking a decline for three consecutive months. In particular, the arts, sports, and leisure-related service sectors (-11 points) saw a large drop as domestic travel demand decreased due to increased overseas travel demand. The professional, scientific, and technical services sector (-8 points) declined due to reduced demand caused by sluggish upstream industries, and the construction sector (-3 points) also fell as profitability in the housing sector worsened due to rising raw material prices.

The outlook BSI for business conditions in September was surveyed at 73, the same as this month (73). Both manufacturing (69) and non-manufacturing (76) remained unchanged from the previous month.

The Economic Sentiment Index (ESI) for August, which combines the BSI with the Consumer Sentiment Index (CSI), recorded 94.0, down 0.1 points from the previous month. The ESI reflects the economic sentiment of all private economic agents.

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