Business Sentiment Reaches Highest Level in Nearly Four Years Amid Semiconductor Boom

Business sentiment among companies has improved to its highest level in nearly four years, driven by a strong semiconductor sector and increased demand in transportation, leisure, and the recovery of broadcasting and film services during the vacation season.

According to the Bank of Korea's 'August Business Survey Results' released on the 26th, the Composite Business Sentiment Index (CBSI) for all industries rose to 99.6 this month, an increase of 1.1 points from the previous month. This marks the highest level since September 2022 (102.0), reaching a peak not seen in three years and eleven months.

The CBSI is a measure of business sentiment calculated using key indices from the Business Survey Index (BSI), which includes five manufacturing and four non-manufacturing sectors. A score above 100 indicates optimistic sentiment, while a score below 100 reflects pessimism.

By sector, the CBSI for manufacturing rose by 0.6 points to 103.8, while the non-manufacturing index increased by 1.5 points to 96.7. The rise in manufacturing was attributed to improvements in product inventory (+0.6 points) and financial conditions (+0.4 points), while non-manufacturing saw gains in sales (+0.6 points) and financial conditions (+0.5 points).

Notably, the manufacturing CBSI has shown a continuous upward trend for five months since recording 97.1 in March, largely influenced by the favorable semiconductor market.

However, the sentiment among large enterprises showed a contrasting trend, with the CBSI for large companies falling by 1.6 points to 103.7, while small and medium-sized enterprises saw an increase of 2.2 points to 99.8.

Park Yong-min, head of the Bank of Korea's Economic Sentiment Survey Team, explained, "This month, the semiconductor sector performed well, and non-manufacturing benefited from increased transportation and leisure demand during the vacation season, as well as the recovery of broadcasting and film services."

Regarding the decline in sentiment among large enterprises, he noted that temporary factors played a significant role. Park stated, "Production was sluggish in sectors with a high concentration of large companies, and the relatively higher vacation time for large enterprises compared to small businesses may have influenced this. The BSI can be affected by temporary factors, so it is important to observe the trend."

Looking ahead, businesses are optimistic about next month. The forecast for the CBSI for September is 99.6, which is an increase of 3.1 points from the previous month's forecast. The manufacturing outlook is 102.5, up 2.0 points, while the non-manufacturing forecast is 97.6, an increase of 3.9 points.

The Economic Sentiment Index (ESI) for August, which incorporates the Consumer Sentiment Index (CSI) into the BSI, rose by 1.5 points to 99.4 compared to the previous month. The seasonally adjusted ESI cyclical fluctuation value also increased by 0.4 points to 96.9.