The Composite Business Sentiment Index (CBSI) for all industries fell 0.5 point from August to 99.1, marking its first decline in three months, according to the Bank of Korea (BOK) Tuesday.
The outlook for October remained unchanged at 99.6. A reading above 100 means business sentiment is stronger than its long-term average, while a figure below 100 indicates weaker sentiment.
Manufacturing CBSI fell 4.3 points to 99.5, while nonmanufacturing sentiment rose 2.2 points to 98.9, its highest level since September 2023.
The October outlook declined 1.4 points to 101.1 for manufacturers, while the nonmanufacturing forecast rose 1.0 point to 98.6.
The divergence was also visible among manufacturers by company size. Sentiment among large manufacturers fell 2.5 points to 101.2, while the index for small and medium-sized firms dropped 5.4 points to 94.4.
Export-oriented manufacturers remained above the long-term average despite a 4.2-point decline to 104.3, while sentiment among domestically focused firms fell 3.7 points to 95.7.
The manufacturing decline was led by product inventories, which subtracted 1.8 points from the CBSI, followed by new orders at 1.0 point and production at 0.6 point.
Automakers reported weaker exports and domestic demand, while strikes and the Chuseok holiday reduced operating rates.
Chemical producers were affected by shipping disruptions linked to Middle East tensions, restructuring in the petrochemical industry and higher raw-material costs.
Electronics, video and communications equipment makers also reported weaker new orders, particularly among display, camera and television manufacturers.
Nonmanufacturing businesses moved in the opposite direction, supported by improved funding and business conditions.
Wholesale and retail firms benefited from Chuseok-related demand for food and pharmaceuticals, while arts, sports and leisure businesses reported more visitors to stadiums and amusement facilities during the holiday and cooler weather.
Professional, scientific and technical service firms also benefited from stronger orders for architecture, design and semiconductor-related engineering.
Stronger confidence outside manufacturing contrasted with weaker factory activity. The manufacturing business-conditions BSI fell 2 points to 79, while production declined 3 points to 89, sales fell 4 points to 89 and new orders dropped 5 points to 87.
Profitability also weakened, with the manufacturing profitability BSI falling 2 points to 79 and funding conditions slipping 1 point to 81.
Raw-material purchase prices eased to 121 from 123, while the selling-price index fell to 98 from 102.
Sluggish domestic demand remained the most frequently cited business difficulty among manufacturers, with its share rising 2.2 percentage points to 21.2 percent.
Higher raw-material prices followed closely at 20.9 percent, while the share citing exchange-rate conditions rose 3.0 percentage points to 8.7 percent.
Among nonmanufacturers, sluggish domestic demand was also the most frequently cited difficulty at 18.8 percent, followed by economic uncertainty at 16.6 percent and labor shortages and higher labor costs at 14.5 percent.
Broader economic sentiment improved despite the pullback in business confidence.
The Economic Sentiment Index (ESI), which combines business and consumer survey indicators, rose 0.5 point to 99.9 in September.
The gain was supported by stronger household expectations, with household income expectations contributing 0.6 point and consumption spending expectations adding 0.3 point.
The ESI's cyclical component rose 0.7 point to 98.3.
AJP Takeaways
- South Korea's all-industry CBSI fell 0.5 point to 99.1 in September as manufacturing sentiment weakened sharply while nonmanufacturing confidence improved.
- Manufacturing CBSI dropped 4.3 points to 99.5, with small and medium-sized firms showing a steeper decline, while nonmanufacturing CBSI rose 2.2 points to 98.9.
- The ESI rose 0.5 point to 99.9 as stronger household income and consumption-spending expectations offset weaker business sentiment.
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