South Korea’s July Manufacturing Outlook Slips; Semiconductors Bright, Chemicals and Steel Bleak
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, signaling worsening business conditions.
- Experts said semiconductors remained strong, with the July outlook index rising to 161, and projected further improvement on continued big tech investment and growing AI chip demand.
- By contrast, the outlook stayed bleak for chemicals (July outlook index 72), steel (July outlook index 78) and mobile phones (July outlook index 81) as sector indexes fell and cost pressures increased.
Forecast Trend Report by Period
Expectations for an improvement in South Korea’s manufacturing sector have weakened. Industry experts still expect semiconductors to remain strong, while the outlook for chemicals and steel stayed gloomy.
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 from 107. It was the first decline in three months. The June current-conditions index came in at 99, down 8 points from 107 in the previous month. A reading below the 100 benchmark indicates business conditions worsened from a month earlier.
By sector, experts continued to expect semiconductor conditions to improve next month. The July outlook index for semiconductors rose to 161 from 156 in the previous month. Continued investment by big tech companies and growing demand for artificial intelligence chips are set to support further improvement in the sector.
By contrast, the outlook for chemicals and steel remained downbeat. The July chemicals outlook index fell 28 points to 72 from 100 in the previous month. Experts cited a reverse-lag effect as a key reason for the weaker chemicals outlook. If the war in the Middle East ends and international crude prices fall, refiners could post valuation losses as oil bought at higher prices loses value.
The steel outlook index tumbled to 78 in July from 122 in June, a 44-point drop. Experts pointed to trade barriers whose effects have yet to be reflected in prices as a negative factor. Higher logistics costs driven by rising oil prices and demand swings depending on whether geopolitical uncertainty eases also weighed on the steel outlook index.
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 benchmark. The June current-conditions index for mobile phones came in at 81, down 12 points from 93 in the previous month. Higher costs stemming from rising semiconductor prices and a weaker won darkened both current conditions and the outlook for the sector.
Jong-kwan Park, Hankyung.com reporter pjk@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
