Business confidence falls to 3-year low
By Lee Hyo-sik
Manufacturers have turned sharply pessimistic on their business outlook, sending their confidence levels to a more than three-year low in July.
The bleak forecast came as large exporters are increasingly concerned about plunging demands for made-in-Korea products in Europe, the United States, China and other major consumer markets.
The Bank of Korea (BOK) said Tuesday that the business survey index (BSI) for 2,446 manufacturers nationwide fell to 71 in July from 82 in June, the lowest since April 2009 when the index stood at 67.
At that time, business sentiment was at bottom following the worldwide financial crisis caused by the collapse of Lehman Brothers in late 2008. A reading below 100 means pessimists outnumber optimists.
``Manufacturers’ sentiment deteriorated sharply over the past month, due to the aggravating European debt fiasco, and a slowdown in Chinese and U.S. economies,’’ a BOK official said. ``To cope with falling demand both at home and abroad, companies had to cut prices to dispose of their products. This worsening bottom line really hit corporate sentiment hard.’’
The official said business sentiment will be unlikely to pick up any time soon, adding the government may have to introduce a range of pump-priming measures to boost the sluggish economy.
About 23.1 percent of companies citied uncertain economic conditions as the largest obstacle to business, followed by stagnant domestic demand (22.3 percent) and slowing exports (8.7 percent).
The economic sentiment index (ESI), the central bank’s new economic indicator that incorporates the BSI with the consumer survey index (CSI) to reflect the sentiment of both businesses and households, dropped to 92 from 96, the lowest level since May 2009 when the index was also 92.
The downbeat data come after BOK revised down its 2012 growth outlook for the Korean economy to 3 percent from 3.5 percent on growing concerns about the eurozone fiscal crisis and sluggish domestic consumption. Earlier, the bank lowered its benchmark rate to 3 percent by 0.25 basis points, the first reduction since February 2009.
The deteriorating business sentiment has been reflected in other surveys.
According to one conducted by the Korea Chamber of Commerce and Industry, 10 out of 11 industries projected that their business will likely deteriorate in the latter half of the year, compared to the first half. Only semiconductor makers said they will perform better.