South Korean companies turned positive on the economic outlook for the first time in six months. Optimism that had centered on exports and semiconductors spread to domestic demand and to materials and components, pushing both manufacturing and non-manufacturing above the neutral line together for the first time in about five years. The outlook for domestic demand, in particular, turned positive for the first time in four years and three months.
The Federation of Korean Industries said on the 25th that its Business Survey Index (BSI) for the country's 600 largest companies by revenue came in at 102.0 for September.
It was the first time the overall BSI outlook had risen above the neutral line of 100 since March this year (102.7), which was surveyed before the outbreak of the U.S.-Iran war, marking a gap of six months. A BSI above 100 means more companies view business conditions more favorably than in the previous month.
Manufacturing and non-manufacturing showed positive outlooks at the same time for the first time in four years and 11 months, since October 2021. The manufacturing BSI jumped 13.3 points to 101.7 in September from 88.4 in August, while non-manufacturing rose 10.9 points to 102.4 from 91.5 over the same period.
Business sentiment improved broadly across industries as well. In manufacturing, six of 10 sub-sectors rose above the neutral line, including pharmaceuticals (125.0), wood, furniture and paper (116.7), textiles, clothing, leather and footwear (115.4), and nonmetallic materials and products (114.3). Electronics and communications equipment registered 100.
The FKI said that unlike earlier this year, when the rebound in sentiment was concentrated in a few sectors such as semiconductors, the improvement this time spread to a range of manufacturing industries, including materials and components. It assessed that the won-dollar exchange rate stabilizing to an average of 1,417.0 won this month, from an average of 1,501.9 won in the second quarter, also played a major role in improving corporate sentiment.
In non-manufacturing, the wholesale and retail BSI reached 115.6 and transportation and warehousing came in at 104.2, lifting the overall index. The FKI said this reflected expectations that consumption and logistics demand would increase ahead of the Chuseok holiday.
By contrast, professional, scientific and technical services and business support services (91.7), leisure, lodging and dining (92.3), electricity, gas and water (94.1), and construction (97.6) remained below the neutral line.
Lee Sang-ho, head of the FKI's economic division, said it was encouraging that the improvement in corporate sentiment, which had been confined to exports and semiconductors, had spread to domestic demand and a variety of industries. He said institutional support was needed so that better sentiment could translate into actual investment and consumption, including expanding eligibility for the domestic production tax credit and enacting a framework act on the development of the service industry.
