Korea: Business confidence falls to four-month low in June
May 30, 2014
The forward-looking Business Survey Index (BSI) on business conditions in the manufacturing sector—elaborated by the Bank of Korea (BoK)—fell from 86 points in May to 81 points in June, which is the lowest point since February. The indicator is still lingering below the 100-point threshold that separates pessimistic from optimistic territory.
Respondents to the June survey showed that business prospects deteriorated in both domestic-oriented firms and in export-oriented businesses. Companies’ sales expectations also deteriorated over the previous month, which meant that firms’ views on their future profitability worsened compared to the previous month.
According to the BSI’s current business situation index, business confidence in the manufacturing sector fell from 82 points in April to 79 points in May.
According to a BoK official, the Sewol-ho ferry disaster that took place on 16 April is taking a toll on consumer and business confidence. The monthly drop in business sentiment in June highlighted concerns that consumer spending would weaken in the coming months and that the strengthening of the Korean won versus the U.S. dollar is likely to dampen export-oriented firms’ profitability.
Author: Ricardo Aceves, Senior Economist