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Consumer, Business Confidence Falling

Posted June. 02, 2006 04:27,   


Amid rising concerns over the gloomy economic prospect for the latter half of this year, corporate confidence was surveyed to be in decline.

Although some indicators including price, export, and service production indicators remain positive, the economic picture is far from rosy.

The Bank of Korea (BOK) surveyed 2,575 companies across the nation from May 16-24 and released a report titled, “A Corporate Survey of May.” According to the report, the Business Survey Index (BSI) of May was 83, four points lower than the previous month.

The BSI stands for the proportion of businesses that feel that the economy is getting better: the lower the BSI, the worse the corporate confidence is.

The expected BSI of June also fell by eight points to 86, the lowest mark since last December (86).

The Federation of Korean Industries (FKI) and Korean Chamber of Commerce (KORCHAM) released similar research results.

The FKI expected the BSI of June to be 98.6, lower than the standard of 100 for the first time in 10 months since August 2005.

According to the survey by KORCHAM on 1,272 manufacturers across the nation, expected BSI for the third quarter (from July to September) was only 94, significantly lower than 116 of the second quarter and lower than 100 for the first time in a year and a half since the first quarter of 2005.

Export-import indicators of May and service production numbers in April, which were released on the same day, were positive but showed some negative signs.

According to the Ministry of Commerce, Industry and Energy, export volume continued to record a double digit year-on-year growth of 21.1 percent to $28 billion. Imports increased by 23.1 percent due to the oil price hike.

Na Do-sung, head of the trade policy bureau at the Ministry of Commerce, Industry and Energy, said, “Export increased despite the aggravated external conditions because companies are trying to export as much as they can before the F/X rate falls further.”

Service production numbers for April announced by National Statistical Office recorded year-on-year growth of 6.0 percent and month-on-month growth of 0.7 percent.

However, wholesale and retail production, the yardstick for consumption recovery, showed year-on-year growth of 3.4 percent but a 0.3 percent drop on a month-on-month basis.

Meanwhile, consumer prices increased by 2.4 percent compared to last year and 0.2 percent from last month. However, due to oil price hikes, prices of petroleum, clothing, and cosmetic products increased substantially. In particular, petroleum product prices increased 10.3 percent year-on-year.

Kim Bum-sik, a senior researcher of the Samsung Economic Research Institute, said, “Though the economy remains on the recovery path, consumer and corporate confidence is being aggravated and a variety of leading indicators are showing negative signs, indicating that growth momentum is being weakened.”