July Economic Outlook 'Cloudy'... Service Industry Brightens During Vacation Season

28th Hankyung BSI Survey
July BSI 98.1... Below Baseline for 28 Consecutive Months
Manufacturing↓·Services↑

The manufacturing industry outlook for July recorded its lowest value in six months. The service industry outlook turned positive for the first time in seven months ahead of the summer vacation season, revealing a polarization phenomenon by industry.

On the 25th, the Korea Economic Association conducted a Business Survey Index (BSI) survey targeting the top 600 companies by sales. The July BSI outlook recorded 96.8. The June BSI actual figure was 98.1, indicating a prolonged deterioration in corporate performance.

BSI is an index that quantifies the business sentiment perceived by companies. A value above 100 means more companies view the economy positively. A value below 100 means the opposite. The BSI outlook has been below the baseline of 100 for 28 consecutive months since April 2022 (99.1).

[Provided by Hankyung Association]

The July business outlook showed mixed results by industry. Manufacturing fell 7.4 percentage points (p) from the previous month (95.9) to 88.5, marking the lowest figure since January this year (87.0). The Korea Economic Association interpreted this as a spread of negative business sentiment across manufacturing due to expected economic slowdown in major export countries such as the U.S. and China in the second half of the year.

The non-manufacturing sector rose 10.3p from the previous month (95.2) to 105.5, turning positive for the first time in seven months since December 2023 (100.5). The improvement in the non-manufacturing business outlook is seen as reflecting industry expectations for a summer vacation season boost.

Among the 10 detailed manufacturing sub-sectors in July, none had a BSI above the baseline. Pharmaceuticals (60.0), which recently experienced a medical crisis, were the worst performing, followed by non-metallic materials and products (68.8).

Among the seven detailed non-manufacturing sub-sectors, business conditions are expected to improve in ▲leisure, accommodation, and dining (142.9) ▲information and communication (117.6) ▲transportation and warehousing (112.0) ▲professional, scientific, technical, and business support services (107.1) ▲wholesale and retail trade (105.7).

The July BSI by survey sector showed negative outlooks in all areas including exports, employment, domestic demand, and investment.

Lee Sang-ho, head of the Economic and Industrial Division at the Korea Economic Association, said, "In the second half of the year, the manufacturing business outlook is very bleak due to concerns about economic slowdown in major export destinations such as the U.S. and China." He added, "To stabilize corporate sentiment, it is necessary to refrain from legislative discussions that undermine corporate vitality, such as expanding directors' fiduciary duties under the Commercial Act and revising the Labor Union Act (so-called 'Yellow Envelope Act')."