By Cho Hyung-kwon
Staff Reporter

The business condition for both manufacturers and non-manufacturers worsened in May and the outlook for June was even more negative, the Bank of Korea (BOK) said on Friday.

The Bank of Korea (BOK) on Friday reported its business survey index (BSI) outlook for manufacturers dropped to 82 in June from 96 in May, the lowest in 10 months since it recorded 72 last August. The outlook for non-manufacturers also dropped to 74 from last month’s 89.

The outlook index showed that compared to May, business sentiment is likely to worsen even further this month.

The central bank said that soaring oil prices, concerns over China’s slowdown and the appreciation of the Korean won eroded business confidence of manufacturing and non-manufacturing companies.

Its BSI for manufacturing companies tumbled to 80 in May from 87 in April while that for non-manufacturing firms also declined to 73 last month from 81 a month earlier.

An index of 100 is regarded as the boom-or-bust line, with a reading above 100 meaning that optimists outnumber pessimists in their business conditions or outlook, and a reading below 100 meaning the opposite.

The BSI for manufacturers continued to decline since last November from 84 to 82 in December, 80 in January and 77 in February, due mainly to climbs in raw materials prices worldwide. The index rose to 81 in March and 87 in April, but fell last month as negative external factors weighed on business sentiment.

The BSI for conglomerates reached 87 and small and medium companies (SME) were at 77 in May, down from 96 and 84 a month ago, while the BSI for export-oriented companies stood at 87 and domestic demand-oriented firms was at 78 last month.

The BOK said that the decline in business sentiment was more serious for companies that depended on domestic demand than exporters.

About 28 percent of the 2,453 respondents said the shortage and subsequent price hikes of raw materials were the biggest obstacles in running their business. Another 27 percent answered that weak domestic demand was the primary factor depressing business sentiment.

Among others, 15.6 percent blamed the uncertain economic conditions for their lackluster business confidence while 5.6 percent said a slowdown in exports was their biggest obstacle.

Regarding the slowdown of the Chinese economy, only 5.2 percent of the respondents said that the tightening measures negatively affected their business in May. However, 21.4 percent said that economic uncertainties could rise and exports could be hurt in the long term if China’s tightening measures were strengthened.

kevincho@koreatimes.co.kr