November Business Outlook 'Negative' for Second Straight Month... Gap Widens Between Manufacturing and Non-Manufacturing

BSI outlook at 98.6, below the baseline for a second consecutive month
Domestic demand at 102.3, highest in four years and six months
Exports post sharpest drop in seven months

Business sentiment among major domestic companies remained below the benchmark for a second consecutive month, continuing its negative trend. While a recovery in consumer sentiment drove improvement in the non-manufacturing sector and domestic demand, weak sentiment in key manufacturing industries such as semiconductors and petrochemicals, as well as in the export sector, constrained the overall business outlook.

According to a survey of the 600 largest companies by sales conducted by the Korea Enterprises Federation (KEF) on October 28, the Business Survey Index (BSI) outlook for November this year stood at 98.6. It remained below the benchmark of 100 for a second consecutive month, matching last month's figure of 98.6.

Meanwhile, the October BSI actual figure came in at 100.0, narrowly reaching the benchmark and breaking out of a prolonged slump for the first time in four years and nine months, since January 2022 (104.3). The BSI measures companies' perceived business conditions and outlook. A reading above 100 indicates that more companies view business conditions positively, while a reading below 100 indicates that more view them negatively.

The November business outlook showed an even sharper divide between industries. The manufacturing BSI outlook stood at 92.1, down 3.5 points from the previous month (95.6), marking a second consecutive month of weakness. By contrast, the non-manufacturing BSI outlook rose 3.4 points from last month's 101.8 to 105.2, its highest level in two years and four months, since July 2024 (105.5). Non-manufacturing has maintained a positive trend for three consecutive months since September (102.4).

Among the 10 manufacturing subsectors, only textiles, apparel, leather and footwear (107.7) showed strength. Four subsectors—wood, furniture and paper; pharmaceuticals; general and precision machinery and equipment; and automobiles and other transport equipment—held at the benchmark (100.0), while the remaining five all showed weakness. In particular, the electronics and communications equipment subsector (83.3), which includes semiconductors, plunged 16.7 points from the previous month, returning to a negative outlook for the first time in nine months, since February (73.3). Analysts say that despite recent strong results, led by AI semiconductors, global uncertainty over the profitability of AI investments and concerns about the staying power of the semiconductor market have weighed on business sentiment. Petroleum refining and chemicals (80.0) also contributed to manufacturing weakness, as profitability deteriorated amid a global supply glut and a sharp drop in ethylene spreads.

In contrast, among the seven non-manufacturing subsectors, wholesale and retail (121.7), electricity, gas and water (121.1), and information and communications (114.3) posted strong gains, buoyed by improving consumer sentiment and expectations of increased heating demand. Three subsectors remained weak: transportation and warehousing (83.3), leisure, lodging and dining (92.3), and construction (95.5). The professional, scientific and technical services and business support services subsector was at the benchmark (100.0).

The survey also showed a marked gap between domestic demand and exports. The domestic demand BSI outlook stood at 102.3, remaining positive for a third consecutive month. This was its highest reading in four years and six months, since May 2022 (104.3), with a gradual recovery in consumer sentiment contributing positively. By contrast, the export BSI outlook was just 95.1, marking a second consecutive month of negative sentiment. It fell 4.6 points from the previous month (99.7), its sharpest decline in seven months.

The remaining areas were also all below the benchmark. Financing conditions (94.3), employment (97.1), profitability (97.4) and investment (98.9) were all expected to deteriorate. The inventory BSI, for which a reading above 100 indicates excess inventory, stood at 102.6, reflecting a negative trend.

Lee Sang-ho, head of the KEF's Economic Research Division, said, "Despite expectations that business conditions will improve in domestic demand and services, the weak outlook for key manufacturing industries is dampening corporate sentiment. In discussions on the Super-Regional Special Zone Act (Mega Special Zone Act), which would provide the institutional foundation for the large-scale investments now being pursued, tax incentives should be expanded and labor regulations eased to provide tangible support for corporate investment and job creation."

A marker for the Federation of Korean Industries in Yeouido, Seoul. Photo by Kang Jinhyung.

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