Manufacturers, after trimming inventories, led the rebound... Business sentiment hits a 21-month high

\r\n[The Financial News] Business conditions as assessed by companies improved in both manufacturing and non-manufacturing in April. In particular, despite higher raw material prices caused by tensions in the Middle East and production disruptions in some industries, the impact of lower manufacturing sales and reduced inventories was more pronounced.
According to the Bank of Korea (BOK)'s April 2026 Business Survey results and Economic Sentiment Index (ESI) released on the 28th, the Composite Business Survey Index (CBSI) for all industries came in at 94.9 in April. That was up 0.8 points from the previous month and marked the highest level in one year and nine months, since July 2024, when it stood at 95.9. It still remained below the long-term average of 100.
The April figure had been forecast at 93.1 in March, so the actual result came in 1.8 points higher.
The CBSI is a sentiment indicator calculated using key indices from the Business Survey Index (BSI), including five manufacturing and four non-manufacturing measures. It uses the long-term average from January 2003 to December 2025 as the benchmark of 100. A reading above that level indicates optimism relative to the long-term average, while a lower reading suggests pessimism. The latest survey covered 3,524 companies nationwide, and 3,205 firms, or 90.9%, responded, including 1,781 manufacturers and 1,424 non-manufacturers.
Manufacturing CBSI rose 2.0 points from the previous month to 99.1. It also far exceeded the forecast made the previous month, which had been 95.9. This was the highest reading in three years and eight months, since August 2022, when it stood at 102.9. The contribution from finished goods inventories was the largest at 2.3 points, followed by business conditions at 0.7 point and new orders at 0.2 point. Production was neutral at 0.0 point, while financial conditions weighed on the index by 1.3 points. The CBSI forecast for next month is 98.0.
Lee Heung-hoo, Team Leader of the Economic Tendency Survey Team at the BOK's Economic Statistics Department 1, explained, "Manufacturing conditions improved partly because exports remained strong and selling prices rose, but the biggest factor was the decline in inventories as companies used existing stock to cope with supply disruptions in raw materials." He added, "The drop in finished goods inventories, which have a negative correlation with the business cycle, is a factor that lifts business sentiment."
\r\nHowever, Lee noted, "If we estimate the business sentiment index excluding finished goods inventories, taking into account the decline in inventories caused by the unusual factor of supply disruptions, both the April actual reading and the May forecast edged lower." In other words, the actual business climate felt by companies was weaker.
The non-manufacturing CBSI stood at 92.1, up 0.1 point from the previous month. Sales and profitability contributed 0.6 point and minus 0.5 point, respectively. The forecast for May was 91.2.
Looking more closely at the manufacturing BSI, the business conditions index came in at 74, up 3 points from the previous month. The forecast for next month was also 74, up 3 points from the previous month.
The production BSI was unchanged from the previous month at 88, while the sales BSI at 87 and the new orders BSI at 85 rose by 4 points and 1 point, respectively. The outlook for next month pointed to 85, 86 and 84, indicating a 2-point decline, a 4-point increase and no change, respectively.
The finished goods inventory level BSI was 97, down 4 points from the previous month, and the forecast for next month at 95 also fell 4 points. The facility investment execution BSI was unchanged from the previous month at 93, while the forecast for next month at 93 was down 1 point.
The profitability BSI stood at 68, down 5 points from the previous month, and the forecast for next month at 66 was down 4 points. The financial conditions BSI came in at 76, down 3 points from the previous month, while the forecast for next month at 80 was down 2 points.
In non-manufacturing, both the April business conditions BSI result and the forecast for next month were unchanged from the previous month at 70. The sales BSI rose 2 points from the previous month to 80, while the forecast for next month was unchanged at 80.
The profitability BSI fell 1 point from the previous month to 78. The forecast for next month was also unchanged at 78. The financial conditions BSI was unchanged from the previous month at 79 for both the actual result and the forecast.
As for management difficulties, manufacturers cited rising raw material prices as the biggest issue, at 34.2%. That was followed by an uncertain economic environment at 19.2% and weak domestic demand at 13.8%. In non-manufacturing, the corresponding shares were 19.4%, 18.7% and 16.7%, respectively.
The April Economic Sentiment Index (ESI) fell 2.3 points from the previous month to 91.7. The previous low was 91.7 in September last year. The ESI is a composite index combining the BSI and the Consumer Sentiment Index. The cyclical component, which removes seasonal and irregular fluctuations from the original ESI series, came in at 94.4, down 0.3 point.
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taeil0808@fnnews.com Kim Tae-il Reporter