Home > Monthly BSI
2016. 11. BSI - BSI for November
Fiscal&Financial Policy Team
2016-10-31
<BSI for November>

Lengthy low growth leads to worsening business sentiment


   The Business Survey Index (BSI), a survey of the nation's top 600 companies in terms of sales conducted by the Federation of Korean Industries (FKI), came in at 89.8 for November. A BSI reading below the break-even 100 mark indicates companies are delivering a gloomy prediction of their business. The reading for the upcoming month fell below 90 for the third time this year since 86.3 registered for February and 89.5 for August. Such a negative business sentiment is said to be arising out of risk factors, including corporate restructuring and slow business in major companies.

   The index for November dropped under par for six straight months, reflecting adverse factors at home and abroad such as the aftermath of strikes by auto-workers, restructuring and a protracted slump in domestic demand and export. On top of this, external uncertainties like a possible rate hike and the presidential race in the U.S. and keen competition on the international front are thought to make the business outlook even gloomier.

   The index for the actual business performance came to 89.0, sinking under the break-even 100 mark for as many as 18 months in a row. Like the reading for November, the October index for performance stayed below 90 for the third time this year following 87.0 for February and 89.7 for July.

   The weak business sentiment is construed as a byproduct of the economy's protracted low growth trend. When growth rates and indexes for the corporate business outlook between 2002 and 2016 are divided into three five-year segments, the average figures have been on a phased downward trend: the growth rate dipped from 4.9%(2002~2006) to 2.8%(2012~3rd quarter, 2016); and the index for business outlook fell from 104.2(2002~2006) to 94.8(2002~November, 2016). This analysis eloquently shows more and more businesses have been holding a negative outlook.

   Meanwhile, despite the global business recession, figures on which German and the U.S. companies make their business decisions have turned out to be optimistic. Contrary to a long-standing pessimism in Korea, average indexes for their business decisions have rebounded since the period between 2007 and 2011. The indexes for China and Japan remained stagnant early this year, but they have recently picked up. Although the Purchasing Management Index (PMI) in China's manufacturing remained below par in January and February, it has been on the rise since then except for July. Figures for Japan's business outlook also were negative during the first and second quarters, but they have been on the upturn during the third quarter.

   An FKI official explained such corporate pessimism, asserting, "Business indexes for Korea are especially negative. The BSI and the growth rate have a similar directivity. Given the predictions for economic growth released by research institutes at home and abroad, recovery of the corporate business sentiment is not very optimistic in the foreseeable future."

< Comprehensive BSI by Month >

 
'15.11
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'16.1
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11
General Business
(Prospects)
95.9
97.5
93.2
86.3
98.3
95.7
102.3
94.8
90.5
89.5
95.0
96.0
89.8
General Business
(Performance)
95.5
95.5
92.1
87.0
94.2
97.3
97.1
91.3
89.7
90.0
92.0
89.0
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