The Bank of Korea (BOK) said on the 28th that corporations' business sentiment improved in April, during the Middle East war. While conditions improved in some respects, a major factor was the drop in product inventories.
As the Strait of Hormuz was blocked and raw material supply was disrupted, inventories fell. The Bank of Korea (BOK) said, "Excluding inventories, corporations' business sentiment was shown to have declined from the previous month."
According to the Bank of Korea (BOK)'s business survey, the all-industry Corporate Business Sentiment Index (CBSI) for April came in at 94.9, up 0.8 points (p) from the previous month. This is the highest in 1 year and 9 months since July 2024 (95.9). It fell in the previous month and then turned upward.
The CBSI is an indicator derived by combining key indexes related to corporate sentiment. With the long-term average (January 2003–December 2025) set at 100, a reading above that means corporations' sentiment is optimistic and below that means pessimistic.
By industry, the manufacturing CBSI rose 2 points from the previous month to 99.1. It is the highest level in 3 years and 8 months since August 2022 (102.9). By type of corporation, large corporations rose 1.3 points to 100 from the previous month, and small and midsize corporations rose 2.5 points to 96.8. Exporting corporations rose 0.3 points to 103.4, and domestic demand–oriented corporations rose 1.9 points to 96.4.
The improvement in manufacturing corporations' sentiment was largely due to reduced inventories. The sentiment index is calculated by the Bank of Korea (BOK) after surveying manufacturing on ▲ business conditions ▲ production ▲ new orders ▲ product inventories ▲ funding conditions, and nonmanufacturing on ▲ business conditions ▲ sales ▲ profitability ▲ funding conditions, and then combining the results.
According to the Bank of Korea (BOK), the decrease in product inventories lifted the manufacturing CBSI by 2.3 points. A Bank of Korea (BOK) official said, "Amid raw material supply disruptions due to the Middle East war, corporations met demand by using existing inventories, and the resulting reduction in product inventories contributed the most to the rebound."
The official added, "Taking into account that inventories fell this month due to the unusual factor of supply disruptions, an estimate of the all-industry CBSI excluding the product inventory figure was shown to have declined by 0.1p from the previous month."
Meanwhile, the nonmanufacturing CBSI rose 0.1 point from the previous month to 92.1.
Meanwhile, the May CBSI outlook was found at 98 for manufacturing, up 2.1 percentage points from the previous month, and 91.2 for nonmanufacturing, the same as the previous month.