By Yoon Ja-young
Staff Reporter
Business condition indicators are rapidly worsening as the economy continues to slide. Not only small businesses, but also conglomerates and manufacturers, as well as services firms, are having a hard time.
According to the Bank of Korea Tuesday, the business sentiment index (BSI) of large businesses is deteriorating due to the global economic slowdown. It stood at 75 in September, falling 10 points from the previous month, and recording its lowest level in five years. It compares with 100 recorded in May.
A reading above 100 means more businesses are optimistic than pessimistic about the economy, while an index below 100 means there are more pessimists. The central bank surveyed 2,154 businesses around the country for the index.
It is notable that even conglomerates are feeling gloomy. The economy was a concern during the former President Roh Moo-hyun administration, but large businesses were an exception. They sustained the economy with expanding exports, and the only concern was the widening gap between exporting conglomerates and small firms that depend on the domestic market.
Large firms, however, are losing steam in exports due to unfavorable global factors. Rising raw material prices and a slowdown of the global economy are marring export growth. ``The operations rate fall due to the Chuseok holidays and the sluggish domestic demand, coupled with an export growth slowdown following the U.S. financial market turmoil seem to have led the BSI of conglomerates to worsen,'' the central bank said.
The BIS for manufacturers recorded 73, down 2 points from August. It is the lowest figure since August 2006. The figure has been sliding since April when it marked 87.
Manufacturers picked rising raw material prices, the foreign exchange rate, economic uncertainties and sluggish domestic demand as their main difficulties.
The capital condition for businesses is also turning bad. Manufacturers' BSI on capital conditions recorded 77, falling 3 points. Conglomerates had the figure stand at 81, dropping 4 points. It is the lowest level since 2003 when the central bank started compiling such data.
Further statistics by the National Statistical Office (NSO) showed industrial output growth falling. Mining and manufacturing production grew only 1.9 percent year-on-year in August, a huge drop from the 8.6 percent growth of the previous month.
Services output gained a mere 1.6 percent, much lower than the 3.9 percent growth of July and recording the smallest growth since April 2005.
The leading indicators estimating economic conditions for the future dropped by 0.4 percentage points, and the coincident indicators also fell by 0.2 percentage points. Facility investment growth dropped to 1.6 percent from 9.9 percent the previous month.