SEOUL — South Korean manufacturing firms are bracing for a tough third quarter, with the majority expecting a downturn in business conditions driven by rising costs and interest rates.
According to Yonhap News Agency, the business sentiment index (BSI) for manufacturers has dropped to 89 for the July-September period, a decline of 10 points from the previous quarter. This index indicates that more companies foresee deteriorating conditions than improving ones, as a reading below 100 suggests.
The survey, which included responses from 2,238 manufacturing companies across the country, highlighted several industry-specific outcomes. Despite a robust demand for chips overseas, which has somewhat bolstered exports, the overall sentiment has been dampened by high interest rates and escalating raw material costs. Notably, chip exporters have a relatively positive outlook with a BSI of 112, reflecting an 8-point increase. In stark contrast, pharmaceutical firms face a significant decline in sentiment, with their index plummeting 27 points to 78.
Other sectors such as cosmetics reported a neutral outlook with a score of 100, while automakers and shipbuilders posted indices of 91 and 97, respectively. However, sectors like steelmaking and refining did not fare as well, recording BSIs of 79 and 85, indicating more pervasive pessimism.
The KCCI report also found that a substantial 60.9 percent of surveyed firms do not expect to meet their operating profit targets for the first half of the year. These companies cited sluggish domestic demand and the burden of high oil and raw material prices as their primary challenges for the remainder of the year.