The Composite Business Sentiment Index (CBSI) for all industries rose 1.1 points from July to 99.6, the highest reading since September 2022, according to the Bank of Korea (BOK) Wednesday.
The outlook for September gained 3.1 points to 99.6. A reading above 100 means business sentiment is stronger than its long-term average, while a figure below 100 indicates weaker sentiment.
Manufacturing CBSI gained 0.6 point to 103.8, while nonmanufacturing sentiment rose 1.5 points to 96.7.
The September outlook increased to 102.5 for manufacturers and 97.6 for nonmanufacturers.
Sentiment also improved among smaller manufacturers.
CBSI for small and medium-sized manufacturers rose 2.2 points to 99.8. The index for large companies fell 1.6 points to 103.7.
The gap between exporters and domestically focused businesses, however, remained wide as growth increasingly leaned on semiconductor shipments.
Sentiment among export-oriented manufacturers climbed to 108.5 from 107.5. The index for domestically focused firms slipped to 99.4 from 100.0.
Outside factories, the improvement was led by transportation and storage businesses, supported by higher maritime freight rates and stronger summer passenger and cargo demand.
Information and communications firms also reported better conditions. Professional, scientific and technical services benefited from stronger orders for architecture, design and semiconductor-related engineering.
Manufacturing sentiment remained firm, but stronger confidence was not matched by stronger factory activity.
The manufacturing business-conditions BSI slipped one point to 81. Production fell to 92 from 93 and sales dropped to 93 from 96, while new orders were unchanged at 92.
The gain in manufacturing CBSI was driven mainly by inventories and funding conditions, which contributed 0.6 point and 0.4 point, respectively.
Business conditions and production each subtracted 0.2 point. Price-related indicators also eased in August.
The BSI for manufacturers' raw-material purchase prices fell to 123 from 129, while the selling-price index declined to 102 from 105.
Profitability improved to 81 from 79, and funding conditions rose to 82 from 81.
Domestic demand remained a weak spot despite the broader improvement in sentiment.
Among manufacturers, the share citing sluggish domestic demand as a major business difficulty rose 2.6 percentage points to 19.0 percent in August.
For nonmanufacturers, weak domestic demand was the most frequently cited difficulty at 19.4 percent, up from 18.4 percent in July.
The broader Economic Sentiment Index, which combines business and consumer confidence, rose 1.5 points to 99.4. Its cyclical component gained 0.4 point to 96.9.
The mixed readings come a day before the BOK's Monetary Policy Board decides whether to follow July's 25-basis-point increase with another hike or keep the benchmark rate unchanged at 2.75 percent.
Five of nine economists surveyed jointly by AJP and Aju Business Daily expect the central bank to hold. A Korea Financial Investment Association survey showed 79 percent of bond-market professionals also forecast no change.
AJP Takeaways
• South Korea's all-industry CBSI rose 1.1 points to 99.6 in August, its highest level since September 2022, while the September outlook climbed 3.1 points to 99.6.
• Semiconductor exports, tourism and transportation helped lift South Korean business sentiment, with manufacturing CBSI reaching 103.8 and nonmanufacturing CBSI rising to 96.7.
• Factory production and sales weakened despite improved corporate confidence, while sluggish domestic demand remained the biggest concern ahead of the Bank of Korea's Aug. 27 rate decision.
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