Business Survey Index Dives to 2-Year Low

With manufacturing companies` forecast for further economic downturn, facility investment and new employment are expected to shrink more as well.

According to a survey on the Business Survey Index (BSI) for business outlook, conducted by the Bank of Korea (BOK) on 2,945 companies with annual sales of over 2 billion won, the BSI for the manufacturing industry in April stood at a record low 75, down from 67 in the first quarter of 2001.

A reading below 100 indicates that more than half of those surveyed companies are pessimistic about the future, with lower figures indicating increasing business fear.

The BSI was below 100 throughout all industries except for shipbuilding and transportation. The manufacturing industry for fabricated metal products and that for lumber fell to 66 from 100 and 63 from 95, respectively.

Export companies and those producing commodities for the domestic market also predicted economic downturn. It seems that both markets at home and abroad will be sluggish.

The BSI for facility investment fell to 90, the lowest level since the fourth quarter of 2001.

In addition, the BSI for profitability dived to 75, a new low since the first quarter of 2001 and that for financing dropped to 83 from 91 in March, suggesting a fall in profitability and difficulties in financing.

The BIS for manufacturing industry performance for March fell slightly to 72 from 75 in February, with the increasing rate of sales to 81 from 84, the operating ratio to 87 from 89, profitability to 73 from 78, and financing to 81 from 86, reflecting gloomy economic conditions.

Economic uncertainties (25.8%) were ranked first among the difficulties in corporate management, followed by slow domestic consumption (18.4%), rising prices of raw materials (16.4%) and a slump in exports (8.5%).

Kwu-Jin Lim mhjh22@donga.com