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South Korea's Business Sentiment Dips in January as Services Sector Weakens

Business sentiment in South Korea edged down in January, ending two months of gains, according to a central bank survey. The decline was driven by a weakening non-manufacturing sector as year-end seasonal boosts faded, despite improved sentiment among manufacturers fueled by strong exports. Separately, the South Korean stock market rallied sharply, with the KOSPI index rising over 1.3%, brushing off renewed trade tensions. The market advance was led by tech shares as investors discounted short-term tariff threats from former U.S. President Donald Trump.

Key Points: Korea Business Sentiment Falls in Jan on Non-Manufacturing Slump

  • Overall business sentiment dips slightly
  • Non-manufacturing sector sentiment weakens
  • Manufacturing sentiment improves on exports
  • KOSPI rallies despite Trump tariff threat
2 min read

Biz sentiment slips in Jan as non-manufacturing sector weakens: BOK

BOK survey shows business sentiment slipped in January as non-manufacturing sector weakened, despite strong exports and a rallying stock market.

"The sentiment among manufacturers improved on the back of increased exports, but that among nonmanufacturers deteriorated due to the fading of year-end seasonal factors. - BOK official"

Seoul, Jan 27

Business sentiment in South Korea fell slightly in January, despite strong exports, due mainly to worsening sentiment in the non-manufacturing sector following the dissipation of year-end base effects, a central bank survey showed on Tuesday.

The Composite Business Sentiment Index (CBSI) for all industries stood at 94 this month, down 0.2 point from December, according to the survey conducted by the Bank of Korea (BOK), reports Yonhap news agency.

The index had risen for two consecutive months to reach 94.2 in December, its highest level since July 2024, before slipping back in January.

The reading for nonmanufacturers fell 2.1 points to 91.7, while the index for manufacturers rose 2.8 points to 97.5.

A reading below 100 indicates that pessimists outnumber optimists.

"The sentiment among manufacturers improved on the back of increased exports, but that among nonmanufacturers deteriorated due to the fading of year-end seasonal factors," a BOK official said.

In December, Black Friday promotions and an increase in Chinese tourists during the winter holiday season, among other factors, helped boost retail sales and nonmanufacturing activity, the official added.

The survey, conducted earlier this month, covered 3,255 companies, including 1,815 manufacturers.

Meanwhile, South Korean stocks traded sharply higher late Tuesday morning in the face of U.S. President Donald Trump's threat to hike tariffs on Korean imports such as automobiles.

After opening lower, the benchmark Korea Composite Stock Price Index (KOSPI) shot up 67.56 points, or 1.36 percent, to 5,017.15 as of 11:20 a.m.

Trump said in a social media post that he's raising "reciprocal" tariffs and auto tariffs on South Korea to 25 percent from 15 percent, arguing that the South Korean legislature has not yet completed a domestic process to implement a bilateral trade deal.

Investors brushed off rekindled tariff uncertainties, expecting the issue would be a short-term jitter rather than lead to a long-term correction. Tech shares led the market advance.

- IANS

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Reader Comments

P
Priya S
The stock market reaction is fascinating! Despite Trump's tariff threats, the KOSPI shot up. Shows how resilient and forward-looking investors can be, focusing on tech growth rather than political noise. A lesson for our markets too, perhaps? 📈
R
Rohit P
This is a classic case of an export-driven economy facing internal weakness. The reliance on Chinese tourists for the non-manufacturing boost is a bit concerning. They need to diversify their service sector drivers, just like we are trying to do with 'Make in India' for manufacturing.
S
Sarah B
While the data is insightful, I feel the article could have provided more context on *why* the non-manufacturing sentiment is so fragile beyond "year-end effects." What are the underlying structural issues? A deeper analysis would be more helpful for readers.
V
Vikram M
The Trump tariff threat is a stark reminder of how geopolitics can impact trade overnight. South Korea's experience is something Indian exporters and policymakers should study closely. We must build stronger, more resilient trade partnerships.
M
Michael C
A reading below 100 for both sectors shows overall pessimism still dominates. It's a slight dip, but the trend will be key to watch. If manufacturing can keep pulling up due to exports, maybe it will lift the rest of the economy. Fingers crossed for them.

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