South Korea’s business sentiment sank to its worst in January in nearly three years with manufacturers turning most pessimistic since the global financial crisis a decade ago about prospects in February due to downturn in key semiconductor segment.
The business survey index (BSI) of the overall industry stood at 69 in January, down 3 points from the previous month and the lowest since March 2016, according to the Bank of Korea on Wednesday. A BSI reading below 100 means more are pessimistic about the business outlook.
The main culprit behind the bleak business prospect was the sluggish manufacturing sector. The BSI for the sector dipped 4 points to 67. By business category, index for the electronics and telecom equipment makers fell 8 points to 70, the lowest since June 2016, with falling semiconductor related capital investment. The index for rubbers and plastics suppliers plunged 13 points to 55 on slowed demand from automakers and constructors. That for chemical firms, however, jumped 11 points to 72 on a rise in selling prices.
By size, the BSI of large manufacturers remained unchanged at 73 but the sentiment of smaller manufacturers fell to 61 from 69.
Small-to-mid sized manufacturing companies and the country`s exports were hit hard by the downturn in the electronics and semiconductor industry, according to the central bank. But larger companies were less affected because the petrochemical industry mainly controlled by major conglomerates in Korea remained robust.
The BSI in the non-manufacturing sector came at 71, down 2 points. The reading is the lowest since July 2016. The index for the information/telecommunication service dipped 8 points to 73 due to seasonality reasons, and that of technology and science sector plunged 10 points to 75 on reduced order from constructors.
For the next month, the business survey index of the overall industrial sector declined 3 points to 68, the lowest since March 2016. The outlook of manufacturers was even grimmer with the index losing 6 points to 65, the worst since April 2009, on fear of further slowdown in memory chip demand. The index for the electronics and telecom sank 14 points to 65 and that of rubber/plastic suppliers was down 12 points to 55. Meanwhile, the BSI of oil refiners rose 9 points to 72 on rebound in global oil prices.
In the non-manufacturing sector, the BSI for the next month was down 2 points to 70. The index of wholesale/retailers sank 9 points to 64 amid concerns of slower smartphone and PC demand.
The economic sentiment indictor that combines the BSI and the consumer sentiment index came at 89.3, down 2.7 points. The cyclical component of the economic sentiment index that excludes seasonal and irregular variations was down 0.8 points at 91.4, the lowest since March 2016.
By Lee Yu-sup and Cho Jeehyun
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