Improved economic conditions
Measures of business confidence in South Korea (EWY) show that manufacturers have become slightly optimistic about business and economic conditions. Exports continued to grow in April 2017, supporting an improved outlook. Business confidence saw the largest rise since March 2015, due to domestic and global economies’ (ACWI) (VT) recovery from the financial crisis of 2008, and the recent impeachment of ex-president Park due to a corruption scandal. The central bank’s recent decision to keep the interest rate steady is likely to boost business confidence further. Let’s look at consumer confidence over the last year.
Improved business confidence in South Korea
South Korea’s business confidence index score rose to 83 in April 2017, compared with 79 in March 2017. South Korea’s business confidence metric averaged 81 between 1991 and 2017. April 2017’s reading was the highest seen since March 2015, when the index reached 80.
In the manufacturing sector, the BSI (business survey index) measures business leaders’ optimism toward the performance of the economy in the current month and their outlook for the next month. A BSI score above 100 implies an improving outlook and a score below 100 suggests a deteriorating outlook.
The index score could also have been affected by less-than-upbeat exports due to the country’s recent rift with neighboring China (FXI), which is currently its largest importer. Any reprisal by China on Korean exports due to geopolitical tensions could impact its trade and economic activity.
Currently, China (MCHI) is South Korea’s (DBKO) largest trading partner. In April, exports to China rose 10.2%, though this rise was lower than the 12.1% gain seen in March 2017. March’s gain was mainly due to growth in the construction sector, which was driven by increased capital expenditure in China.