Business sentiment in South Korea has reached its highest level in over four years, driven by increased production and investment in key industries such as semiconductors and automobiles. Notably, the sentiment among small and domestic businesses has significantly improved, pushing the overall business sentiment index (CBSI) above the long-term average for the first time in over four years.
The Bank of Korea reported on October 29 that the CBSI for all industries rose by 5.1 points from the previous month to 104.2.
This marks the highest level since August 2022 (105.5) and the first time the CBSI has exceeded the long-term average of 100 since September 2022 (102.0).
The CBSI is a psychological indicator derived from the Business Survey Index (BSI), which includes key indices from both manufacturing (five indices) and non-manufacturing sectors (four indices). A score above 100 indicates optimistic sentiment, while a score below 100 reflects pessimism.
In terms of industry specifics, the manufacturing CBSI increased by 6.1 points to 105.6. This rise follows the resolution of disruptions caused by the Chuseok holiday and strikes at major automakers, alongside increased production and investment in core sectors such as semiconductors, automobiles, and shipbuilding.
The normalization of operations at auto parts manufacturers and an uptick in exports contributed to the rise in the index, with improvements also seen in related sectors such as machinery, equipment, and rubber and plastics. Among the components of the manufacturing CBSI, increases in product inventory (+3.5 points) and production (+1.1 points) were significant drivers.
The non-manufacturing CBSI also saw an increase, rising by 4.3 points to 103.2. This improvement was influenced by expanded contracts for semiconductor factories and data center construction, an increase in foreign tourists during China's National Day holiday, and heightened demand for seasonal pharmaceuticals.
Improvements were particularly noted in retail, construction, information and communication, and transportation and warehousing sectors, with profitability (+1.4 points) and sales (+1.1 points) contributing to the overall rise.
By company size, the CBSI for small businesses surged by 11.2 points to 105.6, while large enterprises saw a smaller increase of 3.9 points to 105.1. Exporting companies reported a rise of 1.8 points to 106.1, and domestic companies increased by 8.1 points to 103.8.
Park Yong-min, head of the Bank of Korea's Economic Sentiment Survey Team, noted, "The base effect from reduced working days during the Chuseok holiday and the impact of strikes at major automakers had a more pronounced effect on small businesses. The increase in production and investment in key industries such as semiconductors, automobiles, and shipbuilding has benefited the manufacturing sector, along with a decrease in raw material purchasing burdens due to falling exchange rates."
Looking ahead, the CBSI forecast for November is 101.8, reflecting a 2.2-point increase from the previous survey. The manufacturing index is projected to rise by 1.9 points to 103.0, while the non-manufacturing index is expected to increase by 2.4 points to 101.0.
The Economic Sentiment Index (ESI) for October, which incorporates the Consumer Sentiment Index (CSI), stands at 100.8, up 0.9 points from the previous month. The seasonally adjusted ESI cyclical fluctuation value is 100.1, an increase of 1.0 points.
This survey was conducted from October 14 to 21, involving 3,639 companies nationwide, with 3,450 responses received (1,941 from manufacturing and 1,509 from non-manufacturing sectors).
* This article has been translated by AI.
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