Small businesses’ July sentiment down due to weak economy

[Photo by Han Joo-hyung]

The business confidence of South Korean small businesses and traditional markets worsened simultaneously for two months in a row, mainly due to the weak consumption led by the slow economy and heavy rainfall.

According to the Small Enterprise and Marketing Service, the business survey index (BSI) for small businesses was 57.3 in July, down 6.6 points from the previous month.

The July BSI for traditional markets also fell by 10.2 points to 40.7.

The BSI for small businesses is the lowest in five months since February this year when the figure stood at 56.2, while the BSI for traditional markets is the lowest in 16 months since March last year when the figure was 40.3.

The figures are based on a survey of 2,400 small businesses and 1,300 traditional market businesses conducted between July 18 and July 22.

A reading above 100 indicates that more businesses believe the economy has improved, while vice versa for a reading below 100.

Among small business owners, the most cited reason for the deterioration in BSI is low consumption triggered by the economic downturn, accounting for 32.2 percent.

Other reasons cited include seasonal factors such as weather conditions and off-season, accounting for 30.9 percent, heavy rainfall and water damage at 24.5 percent, and a decrease in foot traffic and customers at 18.3 percent.

Traditional market merchants also identified lower consumption as the most prominent factor, accounting for 33.2 percent, followed by heavy rain and water damage at 30.8 percent, a decrease in foot traffic and customers at 24.4 percent, and seasonal factors at 23.9 percent. Multiple answers were allowed.

By industry, the BSI for small businesses declined in most sectors, including repair with a negative 12.5 points, personal services with a negative 10.0 points, retail with a negative 9.2 points, and manufacturing with a negative 8.4 points. However, BSI for sports and recreation increased by 4 points.

Traditional markets also experienced declines in various categories, with household goods decreasing by a negative 19.1 points, processed foods by a negative 17.6 points, agricultural products by a negative 11.3 points, and seafood by a negative 10.9 points.

However, the August outlook for both small businesses and traditional markets were positive, marking the first improvement in five months.

The BSI outlook for small businesses in August was 83.6, up 9.9 points from the previous month, while the traditional market stood at 62.0, up 5.5 points.

Small businesses attributed the improved outlook for the next month to seasonal factors such as summer break and weather, accounting for 34.5 percent, followed by the end of the rainy season at 23.2 percent.

Traditional markets cited the end of the rainy season and seasonal weather as reasons for the improvement in August, with 30.1 percent and 29.1 percent, respectively.