BSI Trend for All Sectors

  The Federation of Korean Industries (FKI)’s Business Survey Index (BSI), a survey of the business sentiment of the largest 600 Korean companies in revenue, recorded an outlook for July of 96.8, falling short of the baseline of 100¹⁾ . This means the BSI has now been negative for 28 months straight since April 2022 (99.1).

 1  If the BSI is over 100, business sentiment is more positive about the economy than the previous month and vice versa.

  The actual BSI for May was 98.1, which is the 29th negative result since February 2022 (91.5), indicating that business performance continues to be sluggish. 

BSI Trend for Manufacturing and Non-Manufacturing Sectors

  Non-Manufacturing rose 10.3 points from last month’s 95.2 to 105.5, the first positive outlook⁴⁾  in 7 months. The FKI attributed this to the industry’s expectations for a boost from the summer vacation’s seasonal factor.

 2  Manufacturing BSI Outlook: 87.0 (Jan. 2024), 91.7 (Feb.), 100.5 (March), 98.4 (April), 95.5 (May), 95.9 (June), 88.5 (July)

 3  GDP Growth Rates Outlook (H1/H2 2024, BOK): World – 3.1%/3.0%, U.S. – 3.0%/2.0%, China – 4.8%/4.5%

 4  Non-Manufacturing BSI Outlook: 100.5 (Dec. 2023), 95.2 (Jan. 2024), 92.9 (Feb.), 93.5 (March), 98.9 (April), 94.1 (May), 95.2 (June), 105.5 (July)

June BSI For Manufacturing Industries

  

  None of the 10 manufacturing industries crossed the baseline of 100. Pharmaceuticals (60.0) was the lowest due to the widespread doctors’ strike in Korea, followed by non-metallic materials & products (68.8). Another five industries including petroleum refining & petrochemicals (97.0) were below the baseline, while the remaining three industries, food, drink & tobacco; wood, furniture & paper; and general machinery, precise machinery & equipment fell on the baseline.

  Amongst the 7 non-manufacturing industries, leisure, accommodation & food services (142.9), telecommunications (117.6), distribution & warehousing (112.0), professional, science, technical & project support services (107.1) and wholesale & retail (105.7) recorded a positive outlook. Utilities (94.7) and construction (87.8) were the only two industries to record a negative outlook below the baseline of 100.

  The FKI viewed the rise in the non-manufacturing sector BSI to be mainly due to the expectations for increased seasonal demand in leisure, accommodation & food services (142.9) and distribution & warehousing (112.0), as well as telecommunications (117.6) getting a boost from the strong IT market.

BSI Trend for Domestic Demand, Exports & Investment

  When looking at the survey fields for the July BSI, exports (98.1), employment (97.3), domestic demand (96.5), funds (94.9), profitability (94.1), investment (93.9) and inventory (104.3⁵⁾ ) were all negative. In particular, the outlook for exports which had briefly turned positive for June, became negative once again, meaning domestic demand, exports and investment were all negative.

  5  If inventory is over 100 it signifies excess inventory and thus is also negative.

  "The outlook for the manufacturing industry in H2 is very bleak due to concerns about the potential for an economic slowdown in major export destinations such as the United States and China," said Sang-ho Lee, vice president of the FKI’s Economic and Industrial Research Department. "To stabilize business sentiment, it is necessary to avoid discussions on legislation amendments that would dampen business vitality, such as the Commercial Act (expanding the scope of directors' fiduciary duties) and the Trade Union and Labor Relations Adjustment Act (aka the 'yellow envelope bill)."

[Attachment 1] Outlook by Sector

[Attachment 2] Outlook by Survey Field