Sudden Drop of the Corporate Business Prospect, 143 in May →?100. in August

The Sensible business conditions of the companies have dropped at the large rate.

The Federation of Korean Industries (FKI) said on August 4 that the Business Survey Index (BSI) of August keeps at 100.4 as the result of investigations for 600 companies on the basis on the latest sales amounts by industry.

Showing the actual business situation, the BSI of July was 97.3, decreased to below the BSI standard after the lapse of 9 months since last November (BSI 95.9).

When the BSI exceeds 100, there are more companies which are optimistic about the business of the month over the last month, than pessimistic companies.

The FKI interpreted “BSI has sharply dropped for 3 months since May (143.0 of the highest BSI) and the business environment has rapidly been worse.”

The FKI said that the sensible business condition of the company has shrunk with the following reasons;△Delay of the recovery in the world object business owing to the uneasiness of the US funds market △ Delay of the investment recovery and contraction of consumption due to accompanied stagnation of the domestic stock market △Worse export competitiveness and profitability owing to the sharp drop of KRW/USD rate, △Lowering of the corporate activities with continuous events such as Busan Asian Game and the President Election.

In terms of the fields, there is a favorable tendency in the domestic demand (BSI 107.9), exports(Manufacturing 104.7), Investments(103.9), Situation of funds(114.8) and Employment(104.5). But its expectation has been slowed down. The level of profitability(101.8) or inventories(103.8) showed the similar level as July.

In terms of the industries, the light industry(94.2) showed the below 100 owing to the aggravation of the exports environment based on the decrease of KRW/USD rate after the lapse of 9 months since last December.

Heavy and chemical industries (101.8) showed a steady tone. It is forecasted that the steel industry(75.0) and shipbuilding(77.8) will be significantly worse. However, the IT industry (113.4) which has the good exports on the digital TV and mobile phone, and the auto industry which started the regular operation after finishing the wage negotiation have showed the optimistic prospect.

The non-manufacturing industry (102.6) has maintained a flat movement owing to an influence of the construction (106.8) and distribution (107.8) even though it is in the low-demand season

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The FKI proposed “We have to take measures to ease the causes of the external shock such as the uneasiness of US market, and must maintain the basis of the low interest against a slowdown of the object business.”

Yeon-Su Shin ysshin@donga.com