Semiconductors Lift Business Sentiment to a 43-Month High

\r\n[Financial News] In May, business conditions as assessed by companies improved in both manufacturing and non-manufacturing sectors. Despite higher raw material prices caused by Middle East tensions and production disruptions in some industries, strong exports of information technology (IT) products led by semiconductors and better conditions in transportation and warehousing played a major role.
According to the Bank of Korea (BOK), which released the results of its May 2026 Business Survey and Economic Sentiment Index (ESI) on the 27th, the Composite Business Survey Index (CBSI) for all industries came in at 98.9 in May. That was the highest level in three years and seven months, since 99.0 in October 2022. It also rose 4.0 points from the previous month, marking the largest increase in three years since a 4.4-point gain in May 2023.
The May reading had been forecast at 93.9 in April, so the actual figure came in 5.0 points above expectations. Even so, it remained below the long-term average of 100.
The CBSI is a sentiment indicator calculated using key indices from the Business Survey Index, including five manufacturing indicators and four non-manufacturing indicators. It uses the long-term average from January 2003 to December 2025 as the benchmark of 100. A reading above 100 indicates optimism relative to the long-term average, while a reading below 100 indicates pessimism. The survey covered 3,524 companies nationwide, and 3,201 firms responded, or 90.8% of the total, including 1,791 manufacturing companies and 1,410 non-manufacturing companies.
\r\n\r\nThe manufacturing CBSI stood at 100.8, up 1.7 points from the previous month. It also beat the April forecast of 98.0 by 2.8 points. This was the highest level since 102.9 in August 2022, or in three years and nine months. The biggest positive contribution came from business conditions, at 1.4 points, followed by financial conditions at 1.3 points, production at 0.4 points, and new orders at 0.4 points. However, the product inventory reading, which had made the largest contribution the previous month, shifted from 2.3 points to -1.8 points.
The CBSI forecast for next month came in at 100.3.
Lee Heung-hoo, head of the Economic Tendency Survey Team at the BOK's Economic Statistics Department 1, explained, "Despite the war in the Middle East, manufacturing was supported by strong exports centered on IT products, while non-manufacturing benefited from improved conditions in transportation and warehousing, as well as wholesale and retail trade." He added, "As the government and companies diversified import routes, some of the disruptions in raw material supply were also eased."
The non-manufacturing CBSI rose 5.4 points from the previous month to 97.5. Profitability and business conditions contributed 1.9 points and 1.4 points, respectively. Sales and financial conditions also contributed 1.1 points and 1.0 point. The June outlook was 95.9.
Looking more closely at the manufacturing BSI, the business conditions index stood at 80, up 6 points from the previous month. The outlook for next month was also 80, up 6 points from the previous month.
The production BSI rose 2 points to 90, while the sales BSI and new orders BSI climbed 6 points and 2 points, respectively, to 93 and 87. The outlook for next month also improved, with readings of 91, 92 and 89, up 2 points, 6 points and 2 points, respectively.
The product inventory level BSI rose 3 points from the previous month to 100, while the outlook for next month also increased 4 points to 99. The facility investment execution BSI stood at 94, up 1 point from the previous month, and the outlook for next month was also 94, up 1 point.
The profitability BSI rose 6 points from the previous month to 74, and the outlook for next month increased 7 points to 73. The financial conditions BSI rose 3 points to 79, while the outlook for next month also climbed 4 points to 79.
In non-manufacturing, the business conditions BSI for May rose 4 points to 74, and the outlook for next month also increased 4 points to 73. The sales BSI rose 4 points from the previous month to 84, and the outlook for next month also climbed by the same margin.
The profitability BSI rose 4 points from the previous month to 82, and the outlook for next month also increased by the same amount. The financial conditions BSI rose 2 points to 81 in both the current reading and the outlook.
As for business difficulties, manufacturing firms cited higher raw material prices most often, at 32.8%. That was followed by economic uncertainty at 17.7% and weak domestic demand at 15.5%. In non-manufacturing, the corresponding shares were 18.0%, 17.7% and 17.0%, respectively.
The Economic Sentiment Index (ESI) for May rose 5.8 points from the previous month to 97.5. The previous low was 98.8 in February. The size of the increase was the highest in five years and four months, since a 7.2-point rise in January 2021. The ESI is a composite index combining the BSI and the Consumer Sentiment Index (CSI). 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