Manufacturing sentiment improves for a third straight month on strong semiconductor exports; nonmanufacturing slips

[Financial News] Manufacturing firms' business sentiment improved for a third consecutive month as strong information technology exports, led by semiconductors, continued. However, nonmanufacturing sentiment weakened as the construction slump dragged on and a base effect from last month's holiday boost came into play.
According to the Bank of Korea's 'Results of the June 2026 Business Survey' released on the 25th, the Composite Business Survey Index (CBSI) for manufacturers stood at 101.2 this month, up 0.4 points from the previous month. It was the second straight month that the manufacturing CBSI stayed above the benchmark of 100. The CBSI is a sentiment indicator calculated from key items in the Business Survey Index (BSI). A reading above 100 means business sentiment is more optimistic than the long-term average.
The improvement in manufacturing conditions was driven by a recovery in the semiconductor industry and stronger exports. In the electronics, video and communications equipment sector, orders and liquidity conditions improved, supported by solid earnings at semiconductor and parts makers. The petroleum refining and coke sector was helped by stronger demand from downstream industries such as chemicals and by lower oil prices. The automobile sector also saw higher production and orders, especially among parts suppliers.
Differences were also seen by company size and export orientation. The CBSI for large companies rose 1.1 points from the previous month to 104.5, the highest level since May 2022. The CBSI for export-oriented firms also climbed 1.1 points to 106.4. In contrast, the CBSI for small and medium-sized companies fell 0.5 points to 95.7, while the index for domestic-demand firms slipped 0.4 points to 98.0.
The nonmanufacturing CBSI fell 2.1 points from the previous month to 95.4. The decline reflected worsening conditions in construction, arts, sports and leisure, and transportation and warehousing. In construction, fewer new orders in plant and telecom infrastructure projects and rising building material prices weighed on sentiment. In arts, sports and leisure, sales and profitability dropped sharply as the boost from the May holiday period faded.
With manufacturing and nonmanufacturing moving in opposite directions, the overall industry CBSI fell 1.2 points from the previous month to 97.7.
Companies also appeared somewhat cautious about the outlook. The July overall industry CBSI forecast stood at 95.2, down 2.4 points from the previous month. The manufacturing outlook fell 2.1 points to 98.2, while the nonmanufacturing outlook dropped 2.7 points to 93.2. The declines were attributed to concerns over weaker sales and profitability, especially in construction, transportation and warehousing, and information and communications.
A Bank of Korea official said, "Manufacturing is still benefiting from strong exports led by semiconductors, but nonmanufacturing sectors continue to struggle by industry," adding, "Future economic trends will depend on how much the export recovery spreads to domestic demand."

imne@fnnews.com Hong Ye-ji Reporter