Despite Semiconductor Recovery, Auto and Domestic Demand Slump... Corporate Sentiment 'Stalls'

Bank of Korea Announces November Business Survey Index (BSI)
Manufacturing Conditions Improve as Semiconductors and Exports Recover
However, Key Industries Like Automobiles and Primary Metals Continue to Struggle
Non-Manufacturing Also Faces Worsening Sentiment Amid Slowing Consumer Confidence

[Image source=Yonhap News]

Although the semiconductor and some manufacturing sectors are recovering, high inflation and high interest rates have worsened the automobile and domestic demand sectors, resulting in the November corporate sentiment index remaining at a similar level to the previous month, which marked the lowest point in eight months.

According to the 'November Business Survey Index (BSI) and Economic Sentiment Index (ESI) survey results' released by the Bank of Korea on the 29th, the overall industry BSI this month was 70, the same as the previous month. Last month, the BSI hit its lowest point in eight months since February this year (69), and this trend continued into this month.

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

First, the manufacturing sector BSI this month rose by 1 point from the previous month to 70. This marks three consecutive months of increase since August (67). The revival of the previously sluggish semiconductor market significantly influenced this, with the electronics, video, and telecommunications equipment sector BSI rising by 13 points in one month.

Additionally, the decline in raw material prices such as lithium improved profitability, leading to an 8-point increase in the electrical equipment sector BSI.

On the other hand, many sectors other than semiconductors experienced a deterioration in sentiment. The primary metals sector BSI sharply dropped from 70 to 57 in one month, and the automobile sector also fell from 90 to 86.

By company size and type, large corporations and export companies rose by 2 points and 6 points respectively to 75, while small and medium-sized enterprises remained unchanged at 64, and domestic companies fell by 1 point to 68.

Among manufacturing, sentiment improved mainly in semiconductors and export companies, whereas other key industries such as primary metals and automobiles remain sluggish.

Hwang Hee-jin, head of the Bank of Korea's statistics survey team, explained, "The primary metals sector has weakened price competitiveness due to the influx of Japanese steel products influenced by the recent weak yen. In the case of automobiles, high interest rates have led to poor sales and increased inventory, and the decline in electric vehicle demand also had an impact."

A Bank of Korea official said, "The electronics, video, and telecommunications equipment sector had been continuously sluggish but turned around centered on semiconductors, leading to improved performance and outlook. However, other key industries are still weak, so it is necessary to monitor the recovery trend."

(Data provided by the Bank of Korea)

Due to the actual impact of high interest rates and high inflation, consumer sentiment worsened, and the non-manufacturing sector BSI this month fell by 2 points from the previous month to 69. This is the lowest level in 2 years and 11 months since December 2020 (68).

With economic slowdown weakening domestic demand and reducing demand, the wholesale and retail sector (-5 points) worsened, and the construction sector (-3 points) also showed poor performance due to rising raw material prices and decreased orders. The electricity, gas, and steam sector (-5 points) also experienced poor sentiment due to rising fuel costs.

For next month's business outlook BSI, manufacturing and non-manufacturing sectors diverged.

The December manufacturing business outlook BSI was surveyed at 68, down 1 point from the previous month, as primary metals (-10 points), other machinery and equipment (-9 points), and automobiles (-9 points) declined. The December business outlook BSI for the non-manufacturing sector, which fell this month, rose by 2 points to 71, with information and communication (+10 points) and professional, scientific, and technical services (+4 points) increasing.

The November ESI, which reflects the Consumer Sentiment Index (CSI) in the BSI, recorded 91.2, down 0.6 points from the previous month. The seasonally adjusted ESI cyclical component was 92.7, down 0.1 points.

This month's survey was conducted from the 14th to the 21st, targeting 3,524 corporate entities. Among them, 3,326 companies (1,837 manufacturing and 1,489 non-manufacturing) responded to the survey.

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