South Korea Manufacturing Outlook Weakens; Semiconductors Bright, Chemicals and Steel Gloomy
Summary
- The Korea Institute for Industrial Economics & Trade said the July manufacturing outlook index fell to 103 and the June current-conditions index dropped to 99, below the 100 benchmark that signals worsening business conditions from the previous month.
- Experts said the semiconductor sector would improve further as the July semiconductor outlook index rose to 161, supported by continued big tech investment and rising demand for AI chips.
- By contrast, the outlook for the chemicals, steel, and mobile phone sectors remained weak, with outlook indices of 72, 78, and 81, respectively, due to the reverse-lagging effect, trade barriers, rising oil prices, and higher cost burdens.
Forecast Trend Report by Period
Industry experts have grown less optimistic about an improvement in South Korea’s manufacturing sector. They still see semiconductors improving next month, while the outlook for chemicals and steel remains bleak.
The Korea Institute for Industrial Economics & Trade, a state-run policy think tank, said on June 21 that its July manufacturing outlook index fell 4 points from the previous month to 103. It was the first pullback in three months. The June current-conditions index dropped 8 points from 107 a month earlier to 99. A reading below the 100 benchmark means business conditions worsened from the previous month.
By sector, experts remained upbeat on semiconductors for July. The semiconductor outlook index rose to 161 from 156 a month earlier. Continued investment by big tech companies and rising demand for artificial intelligence chips are expected to support further improvement in the sector.
The outlook for chemicals and steel was far weaker. The July chemicals outlook index fell 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, international crude prices could fall, increasing the likelihood that refiners will book valuation losses as the value of oil bought at higher prices declines.
The steel outlook index plunged to 78 in July from 122 in June, a 44-point drop. Experts said the impact of trade barriers has not yet been reflected in prices. Higher logistics costs from rising oil prices and possible shifts in demand 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 current-conditions index for mobile phones was 81, down 12 points from 93 in the previous month. Higher costs from rising semiconductor prices and a weaker won darkened both current conditions and the outlook.
Park Jong-kwan, Hankyung.com reporter pjk@hankyung.com
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