Manufacturing business sentiment hits 4-yr 2-mo high

South Korean companies are experiencing a surge in business confidence, reaching their highest level in four years and two months by August. The manufacturing sector's perception index (PMI) hit an all-time high, up 4.1 months from its previous peak in June at 107.1. The Korea Bank released its 'August Business Climate Survey' on the 26th, indicating that the IT service sector's perception index (CBSI) rose to 99.6, driven by improvements in the IT and telecom sectors.

The survey combines the average of key individual indices such as manufacturing (5) and non-manufacturing (4). If the average (100) rises, it signals optimism, while a decline indicates pessimism across the economy. The manufacturing sector's perception index rose to 103.8, the highest since June 2022, primarily due to improvements in product inventory (+0.6 points) and financial conditions (+0.4 points).

Large and small enterprises recorded a rise of 2.2 points to 99.8 and a drop of 1.6 points to 103.7, respectively. The service sector's index fell to 96.7, below the benchmark, but still rose by 1.5 points compared to the previous month, driven by improvements in transport and leisure services. The service sector's rise was attributed to improved performance in these industries during the holiday season.

Manufacturing firms saw a larger percentage increase in their indices compared to the service sector, primarily due to holiday effects. Overall, the analysis suggests that manufacturing led the recovery, followed by a modest improvement in non-manufacturing sectors. The psychological index for September predicts a 2.0-point increase to 102.5 for manufacturing and a 3.9-point rise to 97.6 for non-manufacturing.

The predicted indices for September were centered around electronics, optical/electronic equipment, and chemicals, while non-manufacturing sectors were driven by wholesale, warehousing, and leisure and recreation. The company economic sentiment index (ESI), which includes the consumer outlook index (CSI), recorded a 1.5-point increase to 99.4 in August, driven by expectations of improved financial conditions and conditions in the manufacturing sector.