Slight Improvement in Manufacturing Sentiment in October... Non-Manufacturing Struggles Amid Domestic Demand Slump

Container unloading operation at Busan Port Photo by Yonhap News

The perceived business conditions of South Korean companies worsened further within a month. In the manufacturing sector, the perceived business conditions improved slightly due to a modest recovery in exports, but the non-manufacturing sector deteriorated significantly due to domestic demand stagnation caused by a slowdown in consumption.

According to the results of the "October Business Survey Index (BSI) and Economic Sentiment Index (ESI)" released by the Bank of Korea on the 26th, the BSI for all industries this month was 70, down 3 points from the previous month.

The BSI is a statistic calculated based on entrepreneurs' judgments and outlooks on current business conditions; if negative responses outnumber positive ones, the index falls below 100.

First, the manufacturing business condition BSI was 69, up 1 point from the previous month.

Although sectors such as electronics, video, and communication equipment (-3 points) declined due to the U.S. announcement of semiconductor export restrictions to China, chemical substances and products (+10 points) and primary metals (+12 points) rose.

Hwang Hee-jin, head of the Bank of Korea's statistics survey team, explained, "Manufacturing exports have been gradually improving recently. Although semiconductors are not there yet, some key industries such as chemicals and steel are seeing improved performance."

In the chemical sector, expectations for increased demand for chemical products from China are growing, and in the steel sector, China's steel production cuts and real estate stimulus measures have acted as favorable factors leading to product price increases.

By company size and type, large enterprises (+2 points), small and medium enterprises (+1 point), and export companies (+6 points) experienced improved perceived business conditions, while domestic companies (-2 points) worsened.

The manufacturing business outlook BSI for next month was recorded at 69, up 2 points from the previous month, with increases in electronics, video, and communication equipment (+3 points) and primary metals (+6 points).

Regarding the improved manufacturing business outlook for next month, Team Leader Hwang said, "It seems that expectations for a slight improvement ahead are reflected as semiconductor prices have formed a bottom."

Myeongdong Shopping Street, Jung-gu, Seoul / Photo by Dongju Yoon doso7@

On the other hand, the non-manufacturing business condition BSI (71) plunged 6 points from the previous month.

Retail and wholesale trade fell 8 points due to domestic demand stagnation and decreased demand caused by economic slowdown, and business facility management, business support, and rental services dropped 12 points due to increased cost burdens from rising labor costs.

Construction fell 4 points due to rising material prices and sluggish construction activity, and information and communication fell 6 points due to deteriorating performance from a decrease in game users and rising labor costs.

The non-manufacturing business outlook BSI for next month also declined 8 points from the previous month to 69. Retail and wholesale trade (-10 points), construction (-9 points), and information and communication (-10 points) all had poor outlooks.

Team Leader Hwang said, "Unless there are major variables such as the Israel-Hamas conflict or high oil prices, the non-manufacturing sector's uncertainty is expected to continue."

The October Economic Sentiment Index (ESI), which reflects the Consumer Sentiment Index (CSI) in the BSI, recorded 91.8, down 0.9 points from the previous month.

The seasonally adjusted ESI cyclical component was 93.1, unchanged from the previous month.

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