Domestic biz sentiment hits 41-month low: Bank of Korea

Economic sentiment in Korea has hit a 41-month low as economic players have offered a gloomy outlook for the Korean economy.

The Bank of Korea said Thursday that the business survey index for manufacturers this month was 69, down three points from the previous month, based on the index and the economic sentiment indicator for September. The figure is the lowest since April 2009. The index reached a record low of 43 in February 2009 in the wake of the global financial crisis.

The business survey index for manufacturing rose to 86 in April from 84 in March, but continued to drop for five months to below 70. The figure was calculated based on a survey of 2,503 Korean businesses, and a reading above 100 means more entrepreneurs are positive about market conditions for a given month and the opposite if the index falls below 100.

A central bank official said, “Economic uncertainty and weak domestic demand are among the difficulties that manufacturing is facing. Compared to last month, more businesses felt stagnant domestic demand and higher costs from rising raw material prices challenging, while fewer businesses complained about slow exports and economic uncertainty.”

With business sentiment seriously deteriorating, that of private economic players has also rapidly cooled. The economic sentiment indicator for September was 89, down one point from August and the lowest since 88 in April 2009. The sentiment index is a composite of the business and consumer survey indexes and shows the private sector perception of economic conditions, including the sentiments of both businesses and consumers.

An economic sentiment indicator of below 100 implies that business sentiment in the private sector is worse than the past average from 2003 to last year.

The Federation of Korean Industries said the business survey index for next month is 97, the fifth consecutive month of below 100. The federation posts its own index by polling 600 Korean enterprises.

constant25@donga.com