Delayed semicon recovery dampens S. Korea’s manufacturing sentiment

South Korea’s manufacturing sentiment deteriorated further in August as the semiconductor recovery was slower than expected. Non-manufacturing sectors, including the service industry, also showed a downward trend for the third consecutive month.

According to the August Business Survey Index (BSI) and Economic Sentiment Index (ESI) results released by the Bank of Korea on Wednesday, the manufacturing sentiment BSI for this month recorded a 5-point drop from the previous month, reaching 67. This marks the lowest level in six months, since February when the reading was at 63.

The manufacturing sentiment BSI stood at 73 for both May and June, but it declined consecutively to 72 in July and further to 67 in August.

BSI is a statistic derived from entrepreneurs’ assessments and outlooks on their current business conditions, and the reading falls below 100 when negative responses outweigh positive ones.

The survey, conducted from August 7 to 14, targeted 3,255 corporations, with 2,654 of them (1,567 manufacturing and 1,087 non-manufacturing) responding.

By sector, the perception of business conditions in the electronics, video, and communication equipment industry worsened by 8 points due to a delayed recovery in chip prices and decreased orders.

Basic metal (-12 points) and chemical product (-8 points) sectors also experienced sluggish performance. Factors contributing to the poor performance in the basic metal industry include weakened price competitiveness due to sluggish demand for Chinese steel and increased supply. For chemical products, concerns grew over delayed recovery in domestic Chinese consumption and increased supply.

By company size and type, both large companies (-2 points) and small and medium-sized enterprises (-8 points), as well as export-oriented companies (-4 points) and domestic-market-oriented companies (-5 points), showed a decline in the manufacturing sentiment BSI.

The non-manufacturing sentiment BSI for August (75) fell by 1 point compared to the previous month, marking its third consecutive month of decline.

The BSI for the coming month remained unchanged at 73 from the previous month. Both manufacturing (69) and non-manufacturing (76) sectors showed no significant changes compared to the previous month. The August Economic Sentiment Index (ESI), incorporating the Consumer Survey Index (CSI) into the BSI, fell by 0.1 point to 94.0.