Business Sentiment Slips to 99.1; Manufacturing Falls Below 100 for First Time in 5 Months
The Composite Business Sentiment Index (CBSI), which gauges how companies perceive economic conditions, fell to 99.1, with manufacturing sentiment dropping below the benchmark of 100 for the first time in five months. According to the Bank of Korea's September Business Survey released on the 29th, the index declined 0.5 points from the previous month, halting two consecutive months of gains. The CBSI is a sentiment indicator calculated from key indices of the Business Survey Index (BSI); with the long-term average (January 2003 to December 2025) set at 100, a reading below that level indicates pessimistic business sentiment.
The September CBSI for manufacturing fell 4.3 points from the previous month to 99.5, dropping below 100 for the first time in five months since April. The decline was driven mainly by product inventories (-1.8 points) and new orders (-1.0 point). The drop was attributed to fewer working days over the Chuseok holiday, combined with a strike at some finished goods makers and the fallout from the Middle East conflict.
Weakness was concentrated in autos, chemicals and chemical products, and electronics, video and communications equipment. Autos were hit by sluggish exports and domestic demand, along with a strike and lower utilization rates over the holiday. For chemicals, transport disruptions from the Middle East conflict, restructuring in the petrochemical industry, and rising raw material prices weighed on sentiment.
The gap by company size was also pronounced. Large firms recorded 101.2, down 2.5 points. Small and medium-sized enterprises fell 5.4 points to 94.4, the steepest drop in five years since September 2021 (-6.5 points). Both exporters (104.3, -4.2 points) and domestic-focused firms (95.7, -3.7 points) declined, with the latter hitting their lowest level since March this year.
Non-manufacturing sentiment, meanwhile, rose. The non-manufacturing CBSI gained 2.2 points from the previous month to 98.9, the highest since September 2023 (99.6). Improvements in financing conditions (1.0 point) and business conditions (0.7 point) led the gains. "Manufacturing declined due to fewer working days, strikes, and the fallout from the Middle East war, while non-manufacturing continued its upward trend on holiday demand and increased outdoor activities," said Park Yong-min, head of the economic sentiment survey team at the BOK's Economic Statistics Department.
Expectations for the economy ahead were mixed. The forward-looking CBSI for next month fell 1.4 points to 101.1 for manufacturing but rose 1 point to 98.6 for non-manufacturing, leaving the all-industry outlook unchanged from the previous month at 99.6. The Economic Sentiment Index (ESI), buoyed by improved consumer confidence, rose 0.5 points to 99.9, its highest level since August 2022 (100.2).
