Business sentiment hits 6-year low

Manufacturing firms’ business confidence has dipped to the lowest level in more than six years, hit by the outbreak of Middle East respiratory syndrome, data from the central bank showed Tuesday.

According to the Bank of Korea, the manufacturing confidence index, called the business survey index, stood at 66 in June, lower than 73 a month before. The monthly BSI marked its lowest figure since it posted 53 in March 2009.

An index reading of 100 is the dividing line between positive and negative sentiment, with a reading below 100 meaning pessimists outnumber optimists and vice versa.

Large firms were less pessimistic about business conditions than small and medium-sized enterprises in June, with the BSI standing at 73, higher than the 57 for SMEs. Both of the segments saw their index fall.

The weak business sentiment was commonly applicable to both domestic demand-focused manufacturers and exporters, as their indexes dropped by 6 and 7 points, respectively.

“When it comes to only the BSI, (the negative) impact of the MERS virus (in late May and June) was estimated to be bigger than that of the Sewol ferry disaster (last year),” said a BOK official.

He said the service sector, including leisure, lodging and transportation, was severely undermined in particular.

The BOK survey showed that 25.8 percent of the sample respondents in the manufacturing industry said the sagging domestic demand has worsened business conditions. Another 19.7 percent picked economic uncertainty and 12.2 percent picked heated market competition.

Some economists predict that manufacturing sentiment would further weaken due to the mounting Greek default worries.

Even when factoring out the impact of MERS, the nation’s industrial output dropped for the third consecutive month in May.

Statistics Korea said Tuesday that the last month’s industrial production declined by 0.6 percent from April. After increasing by 2.2 percent in February, the month-on-month output fell 0.5 percent in March and 0.4 percent in April.

The lackluster export performance was attributable to the weak output. The semiconductor industry saw its exports fall the most, by 7.9 percent, followed by chemicals with 4.3 percent and automobiles with 3.5 percent.

According to officials at the state statistical office and the Finance Ministry, the MERS outbreak in late May is estimated to have dealt a blow to industrial output in June.

By Kim Yon-se (kys@heraldcorp.com)