South Korea’s Manufacturing Outlook Cools as Semiconductors Stay Strong, Chemicals and Steel Weaken
Summary
- The Korea Institute for Industrial Economics & Trade said the July manufacturing outlook index fell to 103 and the June manufacturing conditions index dropped to 99, indicating business conditions worsened from the previous month.
- Experts said the July outlook index for semiconductors rose to 161, with continued big tech investment and growing AI chip demand set to further improve the sector.
- By contrast, outlook indexes for chemicals, steel, and mobile phones came in at 72, 78, and 81, respectively, either falling or remaining below the benchmark, as pressure mounted from oil prices, trade barriers, semiconductor prices, and a weaker won.
Forecast Trend Report by Period
Expectations for an improvement in South Korea’s manufacturing sector have cooled. Industry experts still expect semiconductors to remain strong, but the outlook for chemicals and steel stayed downbeat.
The Korea Institute for Industrial Economics & Trade said on June 21 that its July manufacturing outlook index fell 4 points from the previous month to 103. The index declined month-on-month for the first time in three months. The June manufacturing conditions index came in at 99, down 8 points from 107 a month earlier. A reading below 100 means business conditions deteriorated from the previous month.
By sector, experts continued to see semiconductor conditions improving next month. The July semiconductor outlook index rose to 161 from 156 the previous month. Continued investment by big tech companies and growing demand for artificial intelligence chips are set to further improve the sector.
The outlook remained gloomy for chemicals and steel. The July chemicals outlook index fell to 72 from 100 a month earlier. Experts pointed to a reverse lagging effect as the reason for the weaker view. If the war in the Middle East ends and global crude prices decline, refiners could post valuation losses as oil purchased at higher prices loses value.
The steel outlook index tumbled 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 mobile phone outlook index stood at 81. That was up 1 point from 80 a month earlier, but it remained below the 100 benchmark. The June mobile phone conditions index fell to 81 from 93 the previous month. Higher semiconductor prices and a weaker won increased cost burdens and darkened both current conditions and the outlook for the sector.
Park Jong-kwan, Hankyung.com reporter pjk@hankyung.com
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