South Korea’s business sentiment worsened in July on weak domestic demand amid rising uncertainties on the external front from unrelenting trade disputes between the U.S. and China and a deepening trade row between Korea and Japan.

The business survey index (BSI) of the overall industry for July lost 1 point to 73 from a month ago, according to data released by the Bank of Korea on Tuesday.

The BSI has been hovering between 73 and 74 for five consecutive months since it fell to the worst in January and February in three years. A BSI reading below 100 means more companies are pessimistic about the business outlook.

The BSI for the overall manufacturing sector skidded 2 points to 73 in July. The business sentiment of automakers dipped 7 points to 68 on slow outbound shipments of auto parts, and primary metal manufacturers down 7 points to 65 amid slowdown in the construction market. The electronic devices, video and communications equipment makers, however, added 4 points to 83 thanks to recovering smartphone exports and rising demand for parts for notebook computers.

By size, the BSI for large manufacturers stayed unchanged at 79 from a month ago, but smaller firms down 4 points to 66. The BSI for export-reliant companies added 4 points to 84 but domestic consumption-reliant companies down 5 points to 66.

The BSI for non-manufacturing sector also dropped 2 points to 72. The index for builders slid 2 points to 64 on reduced orders in the slow season, and the sentiment for science and technology firms slipped 12 points to 75. The business sentiment for the accommodations sector rose 6 points to 73 on a rise in travel demand in the summer holiday season.

For the next month, the business survey index of the overall industrial sector stood at 71, down 4 points from the previous month. The outlook of manufacturers declined 4 points to 71, and that of the non-manufacturing sector down 2 points to 72.

The economic sentiment indicator (ESI), which combines the BSI and the consumer sentiment index (CSI), was down 3.2 points to 89.2. The cyclical ESI, which removes seasonal fluctuations and other irregular components, inched down 0.2 point to 91.3.

Manufacturers said their business suffered due to persistently low domestic demand and lingering uncertainties on the external front, on top of intensifying industry competition, according to the BOK. Non-manufacturing companies also considered weak domestic demand the primary reason for the pessimism.

By Kim Yeon-joo and Lee Ha-yeon

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