Business sentiment, which had been dampened by the war in the Middle East, rebounded in April. The headline improvement, however, largely reflected inventory drawdowns caused by supply disruptions.
According to the Bank of Korea's April business survey results and economic sentiment index released on the 28th, the all-industry Composite Business Sentiment Index, or CBSI, rose 0.8 points from the previous month to 94.9 as both manufacturing and nonmanufacturing improved.
The central bank said sentiment was supported by higher manufacturing sales and new orders and smaller finished-goods inventories, despite rising raw material prices and production disruptions in some industries tied to the Middle East war.
The CBSI is a sentiment gauge calculated from key Business Survey Index components — five for manufacturing and four for nonmanufacturing. A reading above the long-term average of 100, based on data from January 2003 to December 2025, indicates optimism; below 100 indicates pessimism.
Lee Heung-hoo, head of the BOK's economic sentiment survey team, said the biggest driver of the April increase was a drop in product inventories as firms met demand by using existing stockpiles amid disruptions in raw material supplies. He added that manufacturing conditions also improved somewhat on continued strong exports and higher selling prices.
Lee said the central bank recalculated sentiment excluding the finished-goods inventory component to account for the unusual supply factor, and found that April conditions and the May outlook edged down. He noted the CBSI has been on an upward trend since March 2025 but remains below 100.
By sector, the manufacturing CBSI rose 2.0 points to 99.1, led by finished-goods inventories (+2.3 points) and business conditions (+0.7). The nonmanufacturing CBSI inched up 0.1 point to 92.1 as sales (+0.6) offset a decline in profitability (-0.5).
For May, the CBSI outlook was 98.0 for manufacturing, up 2.1 points, while nonmanufacturing was unchanged at 91.2.
In detailed BSI results, manufacturing improved in chemicals and chemical products, primary metals and fabricated metal products. In nonmanufacturing, wholesale and retail fell, while construction and information and communications rose.
The April Economic Sentiment Index, or ESI — which incorporates the BSI and the Consumer Sentiment Index — fell 2.3 points from the previous month to 91.7. The BOK cited weaker readings for the manufacturing outlook on funding conditions (-0.6 points) and for household income and consumer spending outlooks, down 1.0 point and 0.8 point, respectively.
* This article has been translated by AI.
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