Delivering another bleak picture to the Korean economy, business sentiment sharply deteriorated in July to suggest sluggishness in investment and hiring may not improve soon.
According to the Bank of Korea on Tuesday, the business survey index (BSI) of all industries came to 75 in July, slipping from 80 in June in the biggest fall since the June 2015 in the aftermath of the outbreak of the Middle East respiratory syndrome to the lowest reading since February last year at the height of political uncertainties after a sitting president was removed from office for the first time ever.
The BSI is compiled by the central bank to project the economy and understand economic performance by studying businesses’ current management conditions and future outlook. A reading above 100 indicates that there are more optimists than pessimist and vice versa for a reading below 100.
Business sentiment has been hurt by spike in minimum wage – up 16.4 percent from beginning of this year and 10.9 percent increase proposed for next year – and cutback in legal working hours. The external front also turned unfavorable amid spread of U.S.-triggered trade war.
In the manufacturing sector, the BSI came to 74 in July, down 7 points from a month ago, marking the first drop in three months. The index for electric image communications equipment sector declined 4 points, while chemical product sector by 11 points, and automobile by 7 points. The BSI prospect for August reached 73, down 7 points from last month’s prospect.
