The manufacturing sector's sentiment is improving on the back of a semiconductor export boom, but nonmanufacturing has deteriorated. Nonmanufacturing was found to be feeling pressure from weak domestic demand, economic uncertainty, and rising labor costs.
According to the "July business survey" released by the Bank of Korea on the 30th, the manufacturing corporations business survey index (CBSI) came in at 103.2. That was up 2 points from the previous month and marked a fourth straight monthly gain. The manufacturing corporations business survey index topped 100 in May for the first time in 3 years and 9 months since Aug. 2022.
The business survey index is a sentiment gauge of corporations that combines conditions such as business climate, production, and funding. With the long-term average (2003–2025) set at 100, above that is optimistic and below that is pessimistic.
Large corporations improved to 105.3, up 0.8 points, and small and midsize corporations rose 1.9 points to 97.6, with both improving. The Bank of Korea assessed that overall corporate sentiment improved apart from any trickle-down effect from major semiconductor corporations. A Bank of Korea official said, "It is difficult to say precisely how much the trickle-down effect from major semiconductor corporations is," and added, "The warmth in key industries such as semiconductors and shipbuilding is affecting small and midsize corporations."
In contrast, the nonmanufacturing corporations business survey index was 95.2 this month, down 0.2 points from the previous month. Perceived business conditions worsened for a second straight month after June. Among the nonmanufacturing corporations participating in this survey, 18.4% cited weak domestic demand as the biggest difficulty. An uncertain economic situation (17.8%) and labor shortages and rising labor costs (13.5%) followed.
In nonmanufacturing, performance in transportation and warehousing, professional, scientific and technical services, and wholesale and retail trade deteriorated notably. As seaborne cargo volumes fell, expense increased and purchase prices for goods rose. A Bank of Korea official said, "Overall, seaborne cargo volumes, including petrochemical products, have declined," and added, "With high freight and logistics costs, the impact of the U.S.–Iran war is still seen affecting the services sector."