Construction Business Sentiment Index Falls in February...Pessimistic Outlook Prevails

Apartment-dense area in Seoul city. Photo by Yonhap News Agency

The index reflecting the business sentiment of construction companies declined last month.

On March 12, the Korea Institute of Construction Industry (KOCI) announced that last month's Construction Business Survey Index (CBSI) was tallied at 62.5, a decrease of 8.7 points from the previous month. When the index falls below the baseline of 100, it indicates that more companies have a pessimistic outlook on the construction market, whereas a reading above 100 reflects a predominantly optimistic view.

By sector, the new orders index fell by 12.3 points to 61.6, while the construction performance index also dropped by 10.9 points to 75.3. In addition, the order backlog index declined by 2.5 points. On the other hand, the funding index rose by 9.3 points to 75.3, and the materials supply index increased by 2.5 points to 91.0.

By construction type, the new orders index for civil engineering dropped by 13.8 points, for housing by 9.4 points, and for non-residential buildings by 12.3 points.

By company size, the index for large companies and small companies fell by 2.4 points and 6.0 points, respectively, while the index for medium-sized companies remained unchanged from the previous month. By region, the Seoul index declined by 17.9 points to 74.5, and the local index fell by 6.1 points to 63.8.

In February, the influence of the new orders index on the overall performance index was 52.7%, a decrease of 7.6 percentage points from the previous month, while the influence of the order backlog index increased by 4.7 percentage points.

The forecast index for March is expected to reach 77.8, up 13.8 points from the previous month.

Meanwhile, construction orders in January amounted to 14.2 trillion won, a 39.9% increase compared to the same month last year. Public sector orders surged by 75.4%, mainly led by civil engineering projects, while private sector orders also increased by 26.8%, mainly due to the impact of housing redevelopment projects.

However, construction performance continues to decline. In January, construction performance amounted to 9.8 trillion won, a decrease of 8.3% compared to the same month last year, marking a 21-month consecutive decline. This decline in construction performance is analyzed to be the result of a combination of seasonal off-peak factors and a recent decrease in construction starts.

The sluggish construction activity has also impacted employment. In January, the number of construction sector employees stood at 1,901,000, down 1.0% from a year earlier. KOCI assessed that although the rate of decline has somewhat narrowed recently, it appears to be partly due to a base effect from last year’s decrease in employment, rather than an actual recovery in business conditions.

Construction costs continue on an upward trend. The construction cost index for January was 133.28, up 1.7% year-on-year, maintaining a high level. For major construction materials, producer prices for cement and ready-mixed concrete fell, while those for general rebar saw a slight increase, resulting in mixed trends in material prices.

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