Due to worsening business sentiment… 6 out of 10 “fell short of target” By Citytimes

2023-09-25 00:20:45

Due to worsening business sentiment… 6 out of 10 “fell short of target”

CityTimes – Containers piled up at Sinseondae Pier and Gamman Pier yard in Busan Port. [사진자료=뉴스1]

[시티타임스=한국일반] A negative trend continues in the economic outlook experienced by manufacturing companies across the country. With high oil prices and China’s economic slowdown holding back growth, companies also forecast the economy in the fourth quarter of this year negatively.

According to the results of the ‘2023 4th Quarter Manufacturing Business Outlook Index (BSI)’ survey conducted by the Korea Chamber of Commerce and Industry (KCCI) on 2,282 manufacturing companies nationwide on the 25th, the BSI forecast for the 4th quarter was 84, compared to the previous quarter (91). It fell by 7 points (p).

The BSI forecast rose to 94 in the second quarter of this year and then fell for two consecutive quarters. The decline increased in the fourth quarter. If BSI is below 100, it means that many companies view the economic outlook for the next quarter negatively.

The BSI forecast for sector extinction, calculated by dividing companies into exports and domestic companies, was 84 for domestic companies and 83 for exports, down 6p and 11p from the previous quarter, respectively. The economic performance of export companies has worsened.

Although the BSI forecast for most industries was below 100, the electrical equipment industry, including pharmaceuticals and batteries, had a positive outlook for the fourth quarter.

The fourth quarter BSI for the pharmaceutical industry and electrical equipment industry were 108 and 104, respectively. This means that there are more companies expecting improvement in business conditions in the fourth quarter.

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The BSI forecasts for Korea’s main export industries, shipbuilding, cosmetics, and automobiles, were 99, 97, and 92, respectively. All three industries were below 100, but higher than the industry average, indicating a relatively positive outlook for the industry in the fourth quarter.

On the other hand, IT/home appliances, steel, oil refining/petrochemicals, including semiconductors, are expected to see a deepening slump as the BSI forecast falls to the 70s.

As companies’ perceived economic conditions worsen, concerns are growing that business performance this year will fall short of targets.

To the question, ‘Can the annual operating profit target be achieved?’, 59.2% of responding companies answered, ‘It will fall short of the target level.’ 38.1% of companies responded that they would ‘achieve the target level’. Only 2.7% of companies expected to exceed their annual operating profit.

The most common reason for expected operating profit to fall short of the target was ‘slow domestic sales’ at 71.9%. ‘Decreased exports due to economic slowdown in overseas markets’ accounted for 37.9%, and ‘increased financing costs such as high interest rates’ accounted for 26.0%. ‘Increasing oil price and exchange rate volatility’ and ‘disruption in supply and demand of raw materials’ were 22.5% and 18.5%, respectively.

Kim Hyun-soo, head of the economic policy team of the Korea Chamber of Commerce and Industry, analyzed, “The current account has recently turned into a surplus, and an export-led economic rebound is expected, but the downside risks to the Chinese economy and the growing uncertainty of raw material prices may act as a burden on the economic recovery.” .

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He added, “If the inflation rate rebounded back to the 3% level in August and the private consumption recovery is delayed due to the private sector’s debt burden due to high interest rates, it is difficult for either exports or domestic demand to drive economic recovery in the second half of the year.”

Read it at City Times

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