Korean manufacturing sentiment sharply deteriorates Q3

2018.07.12 14:11:06 | 2018.07.12 16:30:41

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South Korean manufacturers turned decisively negative about economic and business prospects due to harsh labor laws dampening business sentiment and unfavorable external conditions from higher U.S. dollar, interest rates, and oil prices on top of intensifying trade war.

The business sentiment index (BSI) compiled by the Korea Chamber of Commerce and Industry (KCCI) on a poll of 2,200 manufacturers stood at 87 for the third quarter, drooping sharply from 97 in the second quarter. In the KCCI scale, a reading below 100 indicates that more businesses are pessimistic about future business conditions than those who are not.

Pessimism became more widespread as employers felt the squeeze from shorter workweek hours and higher wage base. The maximum workweek hour was cut back to 52 from 68 starting July. To comply with the new work schedule and keep up with production, manufacturers either have to hire or cut back in output.

Shipbuilders, that have been streamlining workforce and shuttering docks due to scarce work, reported a reading of 67. Automobile component sector showed a reading of 75 amid fears of sweeping 25 percent U.S. tariff on automobile imports. The refining sector also was pessimistic at 82 due to supply concern after the U.S. withdrew from the Iran nuclear deal. Sentiment for steelmakers was equally low at 84 due to U.S. steel import barriers.

Cosmetics sector remained hopeful with a confidence rate of 127. Pharmaceutical and medical equipment sectors also remained buoyant each at 110 and 102.

Changes in labor rules worried them most (49 percent), followed by volatile foreign exchange (16.0 percent), higher interest rates (9.9 percent), spike in oil prices (8.8 percent), and economic slowdown (4.3 percent). Other concerns were trade tensions (2.9 percent) and inter-Korean relations (1.6 percent).

By Kang Doo-soon and Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]