Faltering U.S. economic recovery dampens business sentiment


Korean manufacturers’ business confidence for October stayed at a 21-month low as debt woes in Europe and a faltering U.S. economic recovery dampened sentiment.

The index of manufacturers’ outlook on business conditions stood at 86, unchanged from the previous month, the Bank of Korea data showed on Wednesday. The index is used as a barometer of how local manufacturers perceive market conditions.

The reading of 85 is the lowest since December 2009 when the index bottomed at 85, suggesting that the troubles plaguing the key export markets for Korea are undercutting the local players’ perception about their business performance.

A reading below 100 is a sign that more people are pessimistic about the direction of the market and business conditions.

An index measuring manufacturers’ assessment of current business conditions edged up one point on month to 81 in September.

The survey of 2,516 firms in Korea, conducted between Sept. 14 and 21, showed that a growing number of respondents see the growing economic uncertainty as a key factor for lowering their expectations.

Asked about the most negative factor, economic uncertainties accounted for 18.1 percent in September, up 1.3 percentage points from the previous month. Meanwhile, the rate for currency fluctuation went down to 9.8 percent in September, compared with 13 percent last month.

“Many of the manufacturers are involved in export business, so the weakening of the Korean won against the U.S. dollar seemed to be taken as a positive element, at least for a while,” said Lee Seong-ho, an official at the BOK.

The index for non-manufacturers’ business outlook edged up 3 points to 86 for October.

The Korean economy, which relies heavily on exports for its growth, is facing growing pressure from spreading debt fears in the eurozone and slow recovery of the U.S. economy, with no sign of a major breakthrough generating more anxiety among investors.

BOK Gov. Kim Choong-soo on Tuesday told lawmakers that downside risks to growth outweighed upward risks due to faltering recoveries in advanced economies.

“In terms of upside and downside risks, downward risks are viewed as being predominant on concerns about the sluggish growth of advanced countries and spread of the eurozone sovereign debt problems,” the governor said.

By Yang Sung-jin (insight@heraldcorp.com)