Manufacturing Sentiment Eases, But Export Expectations Edge Higher

Earlier the BoK business manufacturing and non-manufacturing sentiment indicators printed for April. On the manufacturing side we slipped to 73 from 75. Non-manufacturing eased to 69 from 70.

• The manufacturing print is reasonably well correlated with South Korean GDP growth. The downtick in April is consistent with moderate GDP growth. We are still comfortably above recent rough points for the manufacturing index. Note as well we saw yesterday's consumer sentiment index tick down.
• In terms of the detail, we saw more of a downtick in conditions for small and medium sized enterprises rather than large ones. Domestic expectations also eased more so than the export outlook.
• The first chart below overlays the export expectation against South Korea export growth. The steady recovery is consistent with a supportive export growth backdrop, which is likely to be a more important driver of growth over domestic demand in the near term.

Fig 1: South Korea Manufacturing Export Expectations & Export Growth Y/Y

Source: MNI - Market News/Bloomberg

• Manufacturers' profit expectations also ticked lower, albeit slightly. The chart below plots these expectations against the Kospi index. Part of the upbeat local equity outlook recently has reflected optimism around the government's 'value up' program.
• On the non-manufacturing side, most sub-indices ticked lower by a point or so. The headline index is only marginally above early 2024 lows.

Fig 2: Kospi Versus South Korea Manufacturers Profit Expectations

Source: MNI - Market News/Bloomberg