Construction Companies’ Business Sentiment Worsens in April... "Recovery in Construction Market Still Limited"

Apartment complex in Seoul. Photo by Yonhap News.

The construction industry’s business sentiment in April worsened, mainly due to a decline in new orders and other factors.

The Korea Research Institute for Construction Policy (KRICP) announced on May 13 that last month’s Construction Business Survey Index (CBSI) stood at 65.2, down 2.6 points from the previous month. A reading below the baseline of 100 indicates that more companies have a pessimistic outlook on the construction market, while a reading above 100 means optimism prevails.

The overall contraction in business sentiment was attributed to a sharp drop in the material supply index and deteriorating financing conditions.

Looking at the detailed indices by sector: the construction progress index rose 1.4 points to 77.3; the order backlog index increased 6.7 points to 71.4; and the new orders index dropped 1.9 points to 66.6.

The material supply index fell sharply by 19.0 points to 55.3, and the financing conditions index declined by 6.1 points to 65.7. The construction payment index also decreased by 6.0 points to 73.1.

By segment, the new orders index for civil engineering fell by 6.0 points, indicating weakness. The non-residential building sector also saw a drop of 2.8 points. Conversely, the residential sector increased by 9.3 points.

By company size, the large enterprise index dropped 9.6 points to 75.0, while the mid-sized enterprise index decreased by 7.9 points to 60.0. The small enterprise index remained flat at 60.7. Regionally, the Seoul index fell by 8.6 points, whereas the index in other regions rose by 4.0 points.

In March, construction orders reached 21.4 trillion won, up 28.3% year-on-year. Public sector orders increased by 57.8% compared to the previous year, driven by the early execution of the social overhead capital (SOC) budget, while private sector orders rose by 21.4% thanks to large-scale projects.

The construction progress, a coincident indicator of construction market conditions, was 12.3 trillion won, down 2.5% from the previous year. Public and civil engineering sectors saw increases, but private and building sectors continued to underperform.

In March, the number of construction workers was 1,916,000, a decline of 0.8% from the previous year. The construction cost index, which measures construction prices, was 134.4, up 2.5% year-on-year.

Lee Ji-hye, a research fellow at KRICP, said, "In March, both public and private sector construction orders grew, resulting in solid performance, but this was largely driven by large-scale projects and policy execution. While construction progress is declining and the private building sector remains sluggish, business sentiment has also contracted again, indicating that the overall recovery in the construction industry is still limited."

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