Despite Semiconductor Boom, Corporate Business Sentiment Remains Weak for Fourth Consecutive Month in July

FKI Releases BSI Survey of Top 600 Companies
July Outlook Records '98.0'
Manufacturing Turns Negative After One Month
Export BSI Remains Positive for Second Consecutive Month

It has been found that major domestic conglomerates continue to hold a subdued outlook for the economy in July, with the forecast falling below the baseline for the fourth consecutive month.

The Federation of Korean Industries (FKI) announced on the 24th that, according to its Business Survey Index (BSI) survey of the top 600 companies by sales, the BSI forecast for July recorded 98.0. Except for a temporary positive outlook in March (102.7), the index has failed to exceed the neutral baseline of 100 for four straight months: April (85.1), May (87.5), June (98.6), and July (98.0). In addition, the actual BSI score for this month was 93.2, marking a continued weak trend for 4 years and 5 months since February 2022 (91.5).

The economic outlook for July diverged by industry. The BSI forecast for manufacturing came in at 95.6, switching to a negative outlook just one month after posting 101.7 in the previous month. Out of 10 detailed sectors, only ▲Pharmaceuticals (125.0), which includes healthcare, and ▲Electronics and Telecommunications Equipment (112.5), which includes semiconductors and related devices, showed strong performance. However, the remaining seven sectors, excluding ▲Wood, Furniture, and Paper, which was right at the baseline, all showed negative outlooks: ▲Non-metallic Materials (85.7), ▲Metal Processing (88.5), ▲Food, Beverage, and Tobacco (90.0), ▲Textiles, Apparel, Leather, and Footwear (92.9), ▲General and Precision Machinery and Equipment (94.7), ▲Petroleum Refining and Chemicals (96.7), and ▲Automobiles and Transport Equipment (96.8).

In contrast, the non-manufacturing sector recorded 100.6, turning positive for the first time in seven months since December of last year (105.2). More specifically, ▲Leisure, Accommodation, and Food Services (121.4), ▲Wholesale and Retail (112.2), and ▲Professional, Scientific, Technological, and Business Support Services (108.3) led the index upward. However, ▲Electricity, Gas, and Water Supply (84.2), ▲Transportation and Warehousing (91.7), ▲Construction (92.5), and ▲Information and Communication (92.9) continued to show negative sentiment.

The FKI explained that, although the uncertainty in international oil prices has partially eased following the signing of a memorandum of understanding (MOU) for a cessation of hostilities between the United States and Iran, sluggish business sentiment in energy and transportation-related sectors persists due to the accumulated cost burden from the prolonged high oil price phase and an increase in inventory levels.

By sector, the outlook for 'exports' was positive. The export BSI forecast for July stood at 100.6, exceeding the baseline for the second consecutive month. This is the first time in 4 years and 9 months since the October 2021 forecast (100.8) that the export BSI has posted a positive outlook for two consecutive months. In contrast, the other six sectors, including investment (95.5) and domestic demand (96.9), remained below the baseline, signaling a negative outlook.

Lee Sangho, head of the Economic Headquarters at the FKI, stated, "Although the domestic economy has recently shown a strong recovery, most manufacturing sectors, except for certain areas such as semiconductors, continue to face difficulties. To ensure that the warmth of economic recovery spreads to all industries, we must strengthen efforts to introduce support measures that enhance corporate vitality and expand funding channels."

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