By Kim Tong-hyung
A monthly Bank of Korea (BOK) survey says business confidence has risen but only slightly as dismal global conditions have extended manufacturers’ gloomy prospects.
The business sentiment index for April edged up to 85 from 84 measured ahead of March, representing the third consecutive month of improvement. However, a reading below the benchmark 100 indicates that more companies were pessimistic about their prospects amid growing concerns over the economy.
Manufacturers were more likely to be feeling under the weather than others. The sub-index for manufacturers was at 81 for April, up from 80 for the preceding month, while the figure for non-manufacturing firms rose 2 points to 80.
Businesses in the food, leisure, entertainment and hospitality sectors have enjoyed a boost from the warmer weather and schools beginning new semesters, BOK officials said, but the effect could prove to be a one-off.
Manufacturers have been sinking deeper into a funk, pressured by rising costs and declining revenue. Employment in the sector shrank for the seventh consecutive month in February, according to figures from Statistics Korea.
``The improved outlook for April compared to March could be attributed to small- to medium-sized companies and service firms that chiefly rely on the domestic market as they are feeling better after sales picked up with children going back to school. Warmer weather, which brought more tourists here, was also a factor,’’ a BOK official said.
``When excluding these seasonable elements, it would be hard to say that the business climate has improved. It may have actually gotten worse.’’
Firms were expecting modest gains in revenue, consumer spending, exports and plant operation. Higher costs of fuel and raw materials topped their lists of concerns, which also included potential cash problems and the declining value of products.
The index for large firms was measured at 91 for April, down a point from a month earlier. The corresponding figure for small- and medium-sized enterprises (SMEs) was up 2 points at 82. The index for export-oriented businesses declined 2 points from a month earlier at 85, while the figure for firms relying on the domestic market was up 3 points at 85.
Subduing economic activity has forced the BOK to sit on its hands despite rising bills for food and fuel threatening to have inflation peaking again. The bank’s rate-setters kept the country’s key policy rate at 3.25 percent for the ninth consecutive month in March and the streak is widely expected to extend to a 10th.