Bright Manufacturing Economy of Third Quarter

The statistical figures informing the recovery of the economy have been announced continuously.

The manufacturing companies have prospected that the economy of the manufacturing industry will make an upward-turn in the third quarter. The service industry in April has shown the highest rising tendency thus far this year. And the consumer expectation index, that indicates the consumption tendency after six months, recorded 96.3 in April with the continuously rising tendency since January. Hence, many are expecting an economic turnaround.

▼ Bright Manufacturing Economy in the Third Quarter

The Korea Development Bank (KDB) announced in the survey of 1218 domestic manufacturing companies on the economic prospect of the third quarter, that ``the Business Survey Index (BSI) of the third quarter was 115, which greatly increased from 99 of the second quarter. The figure above 100 refers to the optimistic expectation about the economy, and the figure below 100 shows the opposite.

The reasons why the manufacturing industry was expected to be optimistic are ▲the high possibility of the upturn of the US economy due to the repeated reduction of interest rate, and ▲ the improved consumption sentiment due to the sustained low interest rate.

The BSI for the capital situation in the third quarter also increased to 113 from 104 of the previous quarter. The KDB analyzed that ``the optimistic prospect of the economy has derived from the stabilization of the capital market due to the sustained low interest rate and the quick takeover of the corporate bonds, and the somewhat increase of the loans to the small and medium companies.

But the BSI for the facility investment showed just a little increase to 103 from 100 of the previous quarter, indicating that many companies are still taking a wait-and-see attitude.

▼ Large Growth in Service Industry

The service industry showed the largest increase in April. Especially, there was a huge growth in the knowledge-based service industry such as the information technology industry.

According to `the Business Tendency of the Service Industry in April` released yesterday by the National Statistical Office, the business of the service sector (based on the added value) in April increased by 7.3 percent from the same period of last year. Since the average increase rate month-to-month was only 5 percent thus far this year, the increase of 7.3 percent represented the large growth of the service industries.

The information technology industry grew by 2.6 percent, and the transportation, warehouse and communication industries increased by 13.2 percent. The public welfare service sector posted the increase of 13.0 percent, and the education service sector and the medical service sector showed respectively the growth of 12.4 percent and 12.2 percent.

▼ Ambuscade

The KDB pointed out that ``The economy of the US and Japan is still hard to foresee, and the recovery of their economies may be delayed unlike the expectation``.

The KDB told in the report on `the tendency of the domestic and the foreign economy and the economic prospect of 2001`, that ``the growth of the world economy has weakened because of the economic slowdown of the US and Japan, which in turn has affected the exports and the domestic economy. Hence, the increase rate of GDP was adjusted to 4.4 percent from 5.2 percent``.

Lee Na-Yeon larosa@donga.com