The business sentiment in South Korea reached its highest level in seven months on rising expectations that the country’s mainstay industries such as chips will bottom out in the second half of the year.

The Bank of Korea (BOK) said on Wednesday that its business survey index (BSI) of the overall industry for May was 76, up 4 points from the previous month, the central bank said on Wednesday. The index was still below 100 as pessimistic views prevailed but it improved from the previous month when it remained flat. The index was the highest since October last year.

The BSI shows how companies think of the current business environment and their outlook. A reading below 100 means more companies are pessimistic than optimistic, and vice versa for a reading above 100.

The business sentiment among manufacturers reached 73 in May, up 3 points from the previous month. The rise was led by the electronics, visual, and communication equipment sector, including chips, which rose 12 points, and other machinery and equipment sectors that rose 9 points.

The BOK sees that the index was boosted by expectations for a recovery in key industries such as chips, automobiles, and steel. “The current semiconductor business may not be good, but the supply of manufacturing equipment is sustained amid a fair level of balance from existing orders,” said Hwang Hee-jin, head of the statistics team at BOK.

“The BSI for primary metals such as steel also rose due to increased demand from downstream industries such as automobiles and continuing plant operations.”

The BSI for non-manufacturing sectors also gained 4 points from the previous month to 78 in May. The rise was marked particularly in wholesale and retail that gained 5 points, information and communication 6 points, and business facility management, business support, and rental services 8 points.

The increase in offline activities on mild weather played a big part.

“Demand for consumer goods and offline activities increased during the family month and consumption of movies and broadcasting content also increased due to seasonal factors,” Hwang said. “Demand for facility management, travel packages, and events also rose due to an increase in activities.”

The economic sentiment index (ESI), which combines the BSI and the consumer sentiment index (CSI), was 94.2, up 0.4 points from the previous month. An ESI below 100 indicates an economic sentiment that is lower than the previous average.

By Ryu Young-wook and Choi Jieun

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