South Korean business sentiment declines amid manufacturing slump

South Korean business sentiment has shown signs of decline, particularly within the manufacturing sector. According to recent data from the Bank of Korea, the Composite Business Sentiment Index (CBSI) for all industries fell to 99.1 in September, down from the previous month.

The manufacturing sector experienced a sharper decline, dropping 4.3 points to 99.5. Key factors contributing to this downturn include sluggish domestic demand, rising raw material costs, labor strikes, and geopolitical tensions in the Middle East affecting sectors like automotive and chemicals. Additionally, production and new orders have seen significant decreases.

In contrast, the non-manufacturing sector showed some resilience, with the index rising to 98.9. This improvement was driven by seasonal demand during the Chuseok holiday, benefiting the wholesale, retail, and leisure industries. Despite this, overall economic sentiment remains below the long-term average of 100, indicating a prevailing sense of pessimism among many businesses.

Regarding broader economic trends, the Bank of Korea noted that while the semiconductor boom has boosted exports and investment, its benefits remain concentrated in specific IT sectors and regions. The central bank expects these positive effects to eventually ripple through other sectors and regions over time.