Korea’s manufacturing index falls July on weak demand for steel, construction

Business sentiment for the manufacturing sector in South Korea has worsened in July due to weak demand from the steel and construction sectors, pulling down the overall industry sentiment.

According to data released by the Bank of Korea (BOK) on Thursday, the business survey index (BSI) of the manufacturing sector came to 72 in July, down 1 point from a month ago.

The manufacturing index rose to 70 in March and April each from 63 in February and remained upward at 73 until June before falling for the first time in five months in July.

The BSI shows how companies judge the current business environment and their outlook. A reading below 100 means more companies are pessimistic than optimistic and vice versa for above 100.

The decline in the manufacturing index in July was led by primary metals that went down by 14 points, electrical equipment (-10 points), and other machinery and equipment (-6 points).

Primary metals saw their price competitiveness weaken due to sluggish Chinese steel demand and increased supply, while other machinery and equipment was negatively affected by declining demand from downstream sectors such as construction.

The latest survey was conducted on 3,255 companies from July 12 to 19, of which 2,702 companies responded. Of them, 1,606 companies were in manufacturing and 1,096 in non-manufacturing sector.

Sentiment of large companies declined by 3 points and local suppliers 4 points, while that of small- and mid-size enterprises rose by 1 point and export companies 1 point.

The BSI of companies in the non-manufacturing sector was also down 1 point in July from a month ago, declining for a second straight month.

The BSI of the overall industry stood at 74, down 2 points from June. It is the first time in six months that the index across the industry faced downward.

For the coming month, the BSI of the overall industry fell 2 points to 73. Manufacturers’ confidence fell 3 points to 69 and that of non-manufacturers 2 points to 76.

The economic sentiment indicator (ESI), which reflects the consumer sentiment index to the BSI, fell 1.6 Points to 94.1 in July. The cyclical ESI, which eliminates seasonal factors, rose 0.6 point to 94.1.