South Korean business sentiment outlook for June picked up, but at a slow pace as the prolonged pandemic has delayed a recovery in demand at home and abroad, taking a bigger toll to the manufacturing sector grappling with cash flow issues, according to a survey by a local think tank.

According to the Korea Economic Research Institute (KERI) on Tuesday, the business survey index (BSI) outlook of the country’s top 600 companies by sales stood at 68.9 for June, up 7.1 points from the previous month, but it was still below 70.

A reading below 100 means there are more pessimists than optimists about business outlook and vice versa for a reading above 100.

The BSI outlook for June remained below 100 for all sectors – domestic consumption (71.4), exports (71.1), investment (77), cash flow (78.2), inventory (104.8), employment (85.2), and profitability (76.2).

Pessimists also outnumbers optimists in inventory with the reading above 100 meaning an overstock in lines.

By sector, the index was lowest for automobile (42.1), clothing and shoes (50.0), medical and precision machinery (50), nonmetallic mineral (55), and metal and metal processing (55.2).

Cash flow outlook for manufacturing companies, in particular, came to 73.9 – the lowest level since 66.4 in January 2009. Companies are suffering hardship in collecting overseas accounts receivable and extending loans as a result of credit rating downgrades from dwindling demand at home and plunging exports amid prolonged COVID-19 crisis.

The business sentiment outlook improvement during the virus-driven economic slump was much slower compared with during the global financial crisis, when the outlook climbed 24.1 points from January 2009 when the level hit its lowest level of 52 to March. The outlook added 9.6 points from April this year when it hit the lowest level of 59.3 to June.

The BSI for May stood at 70.6, up 19.8 points from April, but remained below 100 for 61 straight months.

The latest business sentiment remained below the baseline in all business fields this month. The BSI for domestic consumption came to 74.2, exports 72, investment 76.8, cash flow 82.6, inventory 107.3, employment 84.9, and profitability 78.4.

By Kim Hyung-joo and Lee Eun-joo

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