South Korea’s July Manufacturing Outlook Slips as Semiconductor View Improves, Chemicals and Steel Weaken
Summary
- The Korea Institute for Industrial Economics & Trade said the manufacturing outlook index fell to 103 in July, showing that expectations for better business conditions weakened from the previous month.
- Experts said the semiconductor sector is set to improve further as big tech investment continues and demand for artificial intelligence (AI) chips rises.
- By contrast, the chemicals, steel, and mobile phone sectors remained under pressure amid sharp declines in their outlook indexes and rising cost burdens.
Forecast Trend Report by Period
Expectations for an improvement in South Korea’s manufacturing sector have weakened, according to a survey of industry experts. Respondents remained positive on semiconductors, but the outlook for chemicals and steel stayed downbeat.
The Korea Institute for Industrial Economics & Trade said on June 21 that its manufacturing outlook index for July fell 4 points from the previous month to 103. It was the first decline in three months. The current-conditions index for June came in at 99, down 8 points from 107 a month earlier. A reading below 100 means business conditions worsened from the previous month.
By sector, experts continued to expect semiconductor conditions to improve next month. The July outlook index for semiconductors rose to 161 from 156 a month earlier. Continued investment by big tech companies and growing demand for artificial intelligence chips are set to further improve the sector, the survey showed.
The outlook for chemicals and steel, by contrast, remained bleak. The July outlook index for chemicals fell 28 points to 72 from 100 the previous month. Experts cited a reverse lagging effect as a key reason. If the war in the Middle East ends and international crude oil prices fall, refiners could post valuation losses as the value of crude bought at higher prices declines.
The steel outlook index plunged to 78 in July from 122 in June, a 44-point drop. Experts cited the fact that the impact of trade barriers has yet to be reflected in prices as a negative factor. Higher logistics costs from rising oil prices and possible demand swings depending on whether geopolitical uncertainty eases also weighed on the steel outlook.
The July outlook index for mobile phones stood at 81. That was up 1 point from 80 a month earlier, but it remained below the 100 mark. The current-conditions index for mobile phones fell to 81 in June from 93 the previous month. Higher semiconductor prices and a weaker won, which added to cost burdens, darkened both current conditions and the outlook for the sector.
Park Jong-gwan, Hankyung.com reporter, pjk@hankyung.com
Korea Economic Daily
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