S.Korea's BSI under 100 for 12th straight month

The economic outlook of South Korean manufacturing and non-manufacturing sectors is negative for May, marking the 12th consecutive month of such pessimism.

A Business Survey Index (BSI) report released on Tuesday by the Federation of Korean Industries (FKI) on the nation's 600 largest companies in sales said the BSI for next month was 93.8. The response rate of 64.2% (385 companies).

The BSI is an indicator of business sentiment. A BSI of over 100 means many companies believe that the economy will improve from the previous month, but a figure under 100 means such companies think the opposite.

Both the manufacturing (94.1) and non-manufacturing (93.3) sectors have been below 100 for the past 12 months, falling below the benchmark since June of last year. This marks the first time in 31 months, since Oct. 2020, that both sectors have experienced a continuous decline for a period of 12 months.

Among manufacturing industries, general machinery and equipment (119.0), wood, furniture and paper (111.1) and food and tobacco (110.0) pointed to positive economic conditions, while metal and metal products (100.0) met the benchmark.

The remaining six industries, including electronics and communications equipment (72.2), textiles and clothing (76.9), pharmaceuticals (83.3), non-metallic products (83.3), petroleum refining and chemicals (88.6) and automobiles and other transportation equipment (89.5), predicted a sluggish economy.

The BSI for electronics and communications equipment, which includes semiconductors, recorded its lowest level in 31 months since Oct. 2020 (71.4).

Among non-manufacturing industries, leisure, lodging and food service (107.1) was the only industry to score above 100, while electricity, gas and water supply (82.4) had the most negative economic outlook. The FKI estimates that the negative economic outlook for electricity, gas and water supply is due to the postponement of the announcement of the second-quarter rate increase plan.

The survey found that all areas, including investment (93.0), profitability (93.2), financial conditions (93.5), exports (94.3), domestic sales (96.6), employment (97.1) and inventory (104.4), have been predicted to be sluggish for the past eight consecutive months since October of last year. A BSI score of over 100 for inventory indicates overproduction and a negative outlook.

Domestic sales, exports and investment have been predicted to be sluggish for the past 11 months since July of last year.

"If the economic outlook remains bleak, centered around major manufacturing industries such as semiconductors, the severity of our economic downturn may deepen," said Choo Kyung-ho, the FKI's head of the economy and industry division, adding, "There is a need to avoid discussions on bills that undermine corporate activity, such as adjusting the pace of minimum wage increases and revising labor union laws."

Write to Jae-Fu Kim at hu@hankyung.com