October Corporate Sentiment Improved but Mixed Results Across Industries (Comprehensive)

On the 28th, ahead of the start of 'With Corona' in November, office workers and citizens having lunch are moving around Myeongdong, Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

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[Asia Economy Reporter Jang Sehee] Corporate sentiment on the economy turned positive after a month amid growing expectations for phased daily recovery (With Corona). This was mainly due to the recovery in the non-manufacturing sector, centered on the service industry, following the achievement of a 70% vaccination rate and the easing of social distancing measures. However, the outlook for November showed mixed results between manufacturing and non-manufacturing industries.

According to the ‘October 2021 Business Survey Index (BSI)’ released by the Bank of Korea on the 29th, the BSI for all industries this month recorded 86, up 2 points from the previous month. The BSI is an indicator that surveys companies’ perceptions of the economy; a value above 100 means more companies responded that business conditions are good, while a value below 100 means more companies responded that conditions are bad.

While manufacturing remained flat at the same level as the previous month, non-manufacturing rose sharply. Kim Daejin, head of the Corporate Statistics Team at the Bank of Korea’s Economic Statistics Bureau, explained, "The slowdown in the spread of COVID-19 and the easing of social distancing measures led to an increase in the overall industry BSI compared to the previous month," adding, "Reflecting expectations for growth recovery, non-manufacturing, especially wholesale and retail trade, rose significantly."

The manufacturing industry BSI remained unchanged at 90 from the previous month. It rose mainly in other machinery and equipment (+5 points) and electrical equipment (+6 points), but fell in metal processing (-8 points) and chemical substances and products (-7 points), resulting in no overall change. The non-manufacturing industry BSI, which includes many face-to-face service sectors, recorded 84, up 5 points from the previous month. It rose mainly in real estate (+13 points) and wholesale and retail trade (+8 points).

The November business outlook BSI was 86, the same as the October forecast. Manufacturing is expected to fall 5 points from the previous month to 88, while non-manufacturing is expected to rise 4 points to 85.

Manufacturing is projected to decline 5 points to 88 due to rising raw material prices and falling memory semiconductor prices, with decreases centered on primary metals (-17 points) and electronic, video, and communication equipment (-9 points). Non-manufacturing is expected to show an upward trend, led by information and communication (+10 points), due to expectations of increased advertising orders.

Jung Kyu-cheol, head of the Economic Outlook Office at the Korea Development Institute (KDI), emphasized, "Rising raw material prices, ongoing global supply bottlenecks, and slowing global economic growth rates in the US, China, and other countries will act as external risk factors," adding, "In particular, manufacturing and export conditions may deteriorate."

Meanwhile, the Economic Sentiment Index (ESI) for October rose 1.0 point from the previous month to 105.6, and the cyclical component increased by 0.7 points to 108.3.

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