Economic Outlook by Companies "Dark but Semiconductors Are Rosy"... Exports Also Positive

June Business Survey Index BSI 95.5
Below 100 Indicates 'Negative Outlook'
Semiconductors Surpass Baseline 100 After 21 Months
Exports Also Exceed 100 at 101... Surpassing 100 for 27 Months

As the economic recession prolongs, Korean companies still have a negative outlook on the economy, but the semiconductor industry, a major sector, is viewed positively.

Korea Economic Association [Image source=Yonhap News]

The Korea Economic Organization Association (KEOA) announced on the 21st that the Business Survey Index (BSI) for 600 major companies by sales recorded a forecast value of 95.5 in June this year.

The BSI indicates that if the value is above the baseline of 100, positive responses about economic prospects outnumber negative ones, while a value below 100 means negative responses are more prevalent. The BSI forecast has remained below 100 for 27 consecutive months since April 2022.

By industry, both manufacturing (95.9) and non-manufacturing (95.2) sectors showed sluggish performance. The manufacturing BSI has stayed below the baseline for three consecutive months since exceeding 100 in March this year (100.5). The non-manufacturing BSI rose by 1.1 points from the previous month (94.1) but still remained below 100. The non-manufacturing BSI has been weak for six consecutive months since January this year.

Within manufacturing sub-sectors, textiles, apparel, leather, and footwear (107.7), which are expected to benefit from summer demand, and electronics and communication equipment (105.9), driven by semiconductor demand, showed positive outlooks. Notably, electronics and communication equipment, which includes semiconductors, surpassed the baseline of 100 for the first time in 21 months since October 2022. KEOA explained this as an improvement in corporate sentiment in related industries due to increased semiconductor exports driven by global demand growth.

Excluding three sectors hovering around the baseline 100 (wood, furniture and paper; pharmaceuticals; food, beverages, and tobacco), the remaining five sectors are expected to experience poor business conditions. In the non-manufacturing sub-sectors, transportation and warehousing (115.4) and professional, scientific & technical, and business support services (115.4), which are expected to see increased demand during school vacations, are anticipated to improve.

Looking at the outlook by sector, exports (101.0) turned positive due to easing Middle East tensions and strong semiconductor performance. This is the first time exports have exceeded the baseline of 100 in 27 months since April 2022 (97.4).

Other sectors aside from exports continued to show negative forecasts. Financial conditions (94.0), investment (95.8), profitability (96.3), domestic demand (95.5), employment (96.9), and inventory (102.6) all had bleak outlooks. An inventory value above 100 indicates excess stock.

Lee Sang-ho, head of the Economic and Industrial Division at KEOA, said, "Although domestic demand and investment remain sluggish, expectations for economic recovery are rising due to improvements in the semiconductor and export sectors. To spread the export boom throughout the real economy, it is necessary to boost corporate vitality through measures promoting domestic demand and supporting investment."

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