Prompt Decline of the Corporate Business

Domestic manufacturing companies forecast that the business of next first quarter will be somewhat chilly. As the sales of the department stores have suddenly dropped this year, a worry of the business depression has been spread.

According to the Bank of Korea (BOK) on December 20, in the next first quarter, the BSI is 91 and suddenly declines, compared with 111 of the fourth quarter. It showed the consecutive decrease of three quarters.

When BSI is 100, it means that the business-optimistic companies are larger than the business-pessimistic companies.

BOK explained that a fear of consumption slowdown, blunting of sales and production increase tendency and the worse payability brought about a contraction of the corporate business.

In terms of the industry, the oil refinery and office equipment will show the similar or a little higher increase to the fourth quarter. However, other industries largely decreased.

For exporting companies, BSI dropped to 86 from 104. For domestic companies, BSI dropped to 114 from 93.

The survey index of domestic sales increase rate (116→99) and the survey index of exports increase rate(106→101) all decreased. The payability prospect index is 86, decreased for the consecutive four quarters, and so the corporate profitability will be worse.

The BSI of the fourth quarter was 96 decreased consecutively for three quarters.

Such the worry of the business depression is shown in the distribution field.

From December 1 to December 19, Lotte Department Store had the sales decreased by 20% over the same period of last year. The sales of Hyundai Department Store and Shinsegae Department Store decreased by 15% and 11.2% respectively over the same period of last year.

Department stores said that the consumption psychology has been frozen owing to the business depression and the year-end discount event was not performed this year

Jang Hae-jin, chief of Shinsegae Department Store said, “The sales of December have largely decreased owing to the business depression, an abolition of the year-end discount and the presidential election. Even though we have the business for the remaining period, the sales of the year will not reach one of last year.”

Kwu-Jin Lim Heon-Jin Lee mhjh22@donga.com mungchii@donga.com