Manufacturing Business Sentiment Declines for Second Month... Outlook Clouds Persist into August

Exports Remain Resilient Amid Weak Domestic Demand

Sentiment in the domestic manufacturing sector has worsened for two consecutive months due to sluggish domestic demand. The outlook for August also remains below the baseline, with most industries—except for semiconductors—expected to continue underperforming.

According to the "July 2026 Industrial Economy Expert Survey" released by the Korea Institute for Industrial Economics and Trade (KIET) on July 26, the Manufacturing Business Sentiment Index (PSI) for July stood at 95, down 4 points from the previous month (99). This is the lowest level in three months.

The PSI uses 100 as the benchmark, indicating no change in business conditions. A reading above 100 means more respondents expect improvement compared to the previous month, while a reading below 100 indicates more expect conditions to worsen.

In detail, the PSI for domestic sales fell to 95, dropping below the benchmark for the first time in three months, whereas exports remained robust at 115, exceeding the benchmark. Production levels also surpassed the benchmark at 105, and investment remained above 100 for the third consecutive month at 106. However, profitability dropped back below the benchmark to 95.

The outlook for August remains pessimistic. The PSI for business prospects is projected at 95, down 8 points from the previous month's forecast (103), falling below the benchmark for the first time in three months. Domestic demand is expected to remain weak at 95, while exports are anticipated to stay strong at 111, continuing their upward trend.

By category, the ICT (102) and machinery (103) sectors in July exceeded the benchmark, but the materials sector was significantly sluggish at 76. In August, only ICT is expected to maintain its level above the benchmark at 108, while machinery is projected to slip to 92 and materials to remain low at 85.

By industry, semiconductors (156), machinery (113), and textiles (107) showed favorable trends in July, whereas mobile phones (56), home appliances (71), chemicals (50), and steel (78) all fell below the benchmark. In August, only semiconductors are expected to remain well above the benchmark at 156, with most other industries—including automobiles (83), machinery (100), chemicals (83), steel (67), and bio-health (95)—expected to continue underperforming.

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