Crisis of confidence drags index to two-year low

Korean manufacturers’ business confidence for January slid to an over two-year low as bleak global economic outlooks increased economic uncertainty, the central bank said yesterday.

The index of manufacturers’ outlook on business conditions reached 79 for January, down from 83 tallied for December, according to a monthly survey by the Bank of Korea. The index measures manufacturers’ expectations for the coming month.

The January data marked the lowest level since the index came in at 78 for July 2009, the bank said.

A reading below the benchmark 100 means pessimists outnumber optimists. The index is based on a nationwide survey of 2,508 companies conducted from Dec. 14-21.

“The dimmer global economic prospects dented manufacturers’ business confidence for next month,” said Lee Seong-ho, an official at the BOK.

“Domestic-focused companies and smaller firms presented bleaker outlooks, indicating that they are feeling more pinch from the slowing economic conditions.”

Lee said the results of the survey did not reflect geopolitical risks stemming from the death of Kim Jong-il.

An index measuring smaller firms’ business confidence for January reached 75, down from 80 tallied for December. An indicator gauging domestic-focused firms’ business outlook came in at 80 for next month, slowing from 83 for December, the central bank said.

Local manufacturers picked stagnant domestic demand and blurry economic conditions as their main stumbling blocks in doing business.

Meanwhile, the survey said that local manufacturers’ business confidence for 2012 slightly rose, compared with this year.

The index of manufacturers’ outlook on business conditions came in at 88 for next year, up from 87 tallied for this year, the central bank noted.

But Lee at the BOK said that a marginal rise in the index doesn’t seem to have much significance, given that the prospects for the local economy remain weak due to stagnant domestic demand and the slowing global economy.

The index of nonmanufacturers’ business outlook came in at 83 for next year, down from 86 for this year. The manufacturing industry accounts for about 30 percent of the Korean economy.

Yonhap