Korea's manufacturers pessimistic as Trump inauguration draws near

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Korea's manufacturers pessimistic as Trump inauguration draws near

Published: 22 Dec. 2024, 18:24

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

Container ships are docked at a port in Busan on Dec. 16. [YONHAP]

Korea’s manufacturing sentiment fell to a two-year low in December, data showed Sunday, with confidence in the semiconductor industry taking a steep plunge, signaling that the country's rocky manufacturing conditions may continue to deteriorate in 2025.

The Professional Survey Index (PSI), which measures the manufacturing sector’s business confidence based on expert surveys, retreated to 19 points to a two-year low of 81 in December following President Yoon Suk Yeol's short-lived martial law declaration and subsequent impeachment, which spooked global investors and injected volatility into Korea's currency and trade environment, according to the Korea Institute for Industrial Economics & Trade (KIET).

A PSI below 100 indicates that pessimism on the business situation outweighs optimism, while a reading above 100 indicates the opposite. The KIET surveyed 133 industry experts, including analysts, on the current month’s business condition and the next month’s outlook from Dec. 9 to Dec. 13.

Manufacturing confidence for the upcoming month of January fell to a two-year low of 75, 21 points from the previous month's forecast for December, signaling a significant deterioration of business conditions. The index for the succeeding month has been on a decline for the fifth consecutive month; it last dipped to a comparable level when it hit 70 in November 2022.

Fears of export slowdown, driven by sluggish growth across the economies of key import partners, as well as U.S. President-elect Donald Trump's continued hints that he will raise tariffs following his January inauguration, weighed on the industry's confidence. Export companies across 12 sectors surveyed by the Federation of Korean Industries (FKI), a major business lobby, expect the country's export volume to grow only 1.4 percent next year, a significant deceleration from the 8.3 percent increase seen from January through November of 2024.

The PSI on all economic activities underperformed the benchmark. Business confidence in domestic demand fell 21 points to 80, and that of score on exports dipped 18 points to 87.

By sector, experts’ views on semiconductor manufacturing dipped to a 19-month low of 82, down 18 points from the previous month.

Shipbuilding was the only industry with a three-digit PSI of 100, while the rest, including display, mobile phones, home appliances and cars, came in below the mark.

The Dec. 3 martial law declaration sent credit card spending plummeting 26 percent in the first week of December from a week prior, according to nowcast data from Statistics Korea, marking the biggest drop since the 26.3 percent plunge seen during the Chuseok harvest festival in the third week of September.

The government has been scrambling to boost the domestic demand recovery, promising to start executing next year’s budget at the beginning of the new year.

BY SHIN HA-NEE [[email protected]]