SME Business Sentiment Declines for Second Consecutive Month... May Outlook Falls to 77.6

As the Middle East war continues, the business outlook for small and medium-sized enterprises (SMEs) for the coming month has worsened compared to the previous month. This marks a two-month decline, driven by rising raw material costs and sluggish sales.

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According to the “May SME Business Outlook Survey” released by the Korea Federation of SMEs on April 29, the Business Survey Index (SBHI) for May stood at 77.6, down 3.2 points from the previous month.

The decline was greater in the non-manufacturing sector. The business outlook for manufacturing in May decreased by 2.2 points to 78.5 compared to the previous month, while non-manufacturing dropped by 3.5 points to 77.3. The construction industry (69.6) increased by 0.8 points, whereas the service industry (78.8) fell by 4.4 points.

Within manufacturing, non-metallic mineral products (73.2) rose by 9.3 points, and beverages (98.6) increased by 6.7 points, with a total of six industries reporting increases from the previous month. By contrast, electronic components, computers, visual, audio, and telecommunications equipment (79.8) fell by 15.0 points, and medical substances and pharmaceuticals (82.4) dropped by 11.0 points, with 17 industries declining compared to the previous month.

In the service sector, three industries saw month-on-month increases, including accommodation and food services (87.5, up 7.6 points) and arts, sports, and leisure-related services (96.7, up 5.1 points). On the other hand, seven industries-including transportation (75.4, down 15.2 points) and real estate (95.0, down 7.4 points)-experienced declines.

By category, there were decreases from the previous month in ▲exports (85.0→78.8), ▲operating profit (76.5→72.5), ▲financial conditions (80.0→77.0), and ▲domestic sales (81.3→78.6). The employment index, which moves in the opposite direction to the others (97.0→96.7), is expected to improve compared to last month.

For April, the most significant business challenge facing SMEs was “sluggish sales (product sales)” (52.6%). The next most common difficulties were ▲rising raw material prices (46.1%), ▲increased labor costs (27.4%), and ▲intensified competition among companies (25.8%), in that order.

The average operating rate for small manufacturing businesses in March was 75.4%, up 1.8 percentage points from the previous month. By size, small enterprises (71.0%) rose by 1.7 percentage points, and medium-sized enterprises (77.9%) also increased by 1.7 percentage points.

By business type, general manufacturing (75.1%) rose by 2.0 percentage points from the previous month, while innovative manufacturing (75.9%) increased by 1.1 percentage points.

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