July Business Outlook Dims Despite Strong Semiconductor and Pharmaceutical Exports

Domestic companies in South Korea have continued to project a bleak business outlook for the fourth consecutive month. While exports, particularly in semiconductors, show signs of improvement, most other manufacturing sectors remain concerned about deteriorating business conditions.

On June 24, the Korea Economic Association reported that the Business Survey Index (BSI) for July is projected at 98.0, based on a survey of 600 major companies by sales revenue.

A BSI below 100 indicates that more companies expect a downturn than an upturn. The index has been below the baseline for four months since recording 102.7 in March.

Overall Business BSI Trend.[Photo=Korea Economic Association]

The outlook varies by sector, with manufacturing and non-manufacturing showing contrasting trends. The manufacturing BSI fell to 95.6, dropping below the baseline again after a month, while the non-manufacturing BSI rose to 100.6, marking a positive shift for the first time in seven months since December of last year.

Within manufacturing, pharmaceuticals (125.0) and electronics and communication equipment, including semiconductors (112.5), performed well. In contrast, most sectors, including automobiles and other transportation equipment (96.8), general and precision machinery and equipment (94.7), and metal and metal products (88.5), are expected to face challenges.

In non-manufacturing, sectors such as leisure, accommodation, and dining (121.4) and retail (112.2) are showing strength, buoyed by expectations for summer vacation demand. However, construction (92.5), transportation and warehousing (91.7), and utilities (84.2) are projected to struggle.

By segment, the export BSI stands at 100.6, remaining above the baseline for two consecutive months. This marks the first time since October 2021 that export expectations have entered positive territory for two months in a row. Conversely, most sectors, including investment (95.5), domestic consumption (96.9), and employment (94.9), continue to show negative outlooks.

Lee Sang-ho, head of the Economic Division at the Korea Economic Association, stated, "While the domestic economy is showing strong recovery, many manufacturing sectors, except for specific industries like semiconductors, continue to face difficulties. We need to enhance support measures to boost corporate vitality and expand funding channels to ensure the recovery spreads across all industries."

Meanwhile, according to the import and export price index statistics released by the Bank of Korea on June 16, the export price index as of May (preliminary, with 2020 as the base year at 100) was 188.58, up 0.3% from April's 188.02.

* This article has been translated by AI.