Corporate sentiment has cooled again due to rising tensions in the Middle East region.

It has fallen to the 80s, below the baseline, for the first time in three months since May, deepening concerns in the business field.

According to a survey of the Business Survey Index (BSI) conducted by the Korea Economic Research Institute on the top 600 companies by revenue, the combined BSI forecast for August 2026 recorded 89.9.

This marks a decline of 8.1 points from the previous month, dropping back to the 80s for the first time in three months, and falling below the baseline of 100 for the fifth consecutive month.

The deterioration in business sentiment is attributed to rising raw material prices and supply chain instability due to renewed Middle East tensions.

▲ Combined BSI 89.9…Fifth consecutive month below baseline

The August combined BSI forecast was recorded at 89.9. While it exceeded the baseline in March at 102.7, it has fallen below 100 for five consecutive months since April, with negative economic outlook continuing.

In particular, business sentiment, which had recovered somewhat to the mid-90s in June and July, deteriorated sharply again, retreating to the 80s for the first time in three months.

The July actual BSI recorded 94.4, and on an actual performance basis, it has fallen below the baseline for four years and six months consecutively since February 2022, indicating prolonged weakness in corporate sentiment.

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▲ Manufacturing and non-manufacturing sectors both declining…Simultaneous deterioration after three months

Manufacturing BSI fell 7.2 points to 88.4 from the previous month, while non-manufacturing dropped 9.1 points to 91.5.

Non-manufacturing had been above the baseline at 100.6 the previous month but switched back to negative territory within a month.

The simultaneous fall below the baseline by both manufacturing and non-manufacturing sectors marks the first time in three months since May, showing that concerns about economic slowdown are spreading across industries rather than specific sectors.

▲ Semiconductors hold strong…Petrochemicals hit lowest level in 17.5 years

In manufacturing, electronics and telecommunications equipment recorded 118.8, and food and tobacco posted 105.6, exceeding the baseline.

This reflects strong semiconductor exports and expectations for increased summer consumption.

In contrast, petroleum refining and chemical industries recorded 57.7, dropping to the lowest level in 17 years and six months since February 2009 during the global financial crisis.

Most other manufacturing sectors also showed weak outlooks, including general and precision machinery and equipment (75.0), wood, furniture and paper (83.3), and non-metallic minerals and products (85.7).

The Korea Economic Research Institute analyzed that raw material and energy cost burdens, deteriorating ethylene spreads, and supply chain uncertainties due to prolonged Middle East conflicts significantly dampened sentiment in the petrochemical industry.

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▲ Service sector shows temperature variance…Only vacation-related sectors 'clear'

In non-manufacturing, leisure, accommodation and food service recorded the highest outlook at 116.7. This is analyzed as reflecting the peak season effect of summer vacation.

Meanwhile, electricity, gas and water fell to 73.7, while most sectors including construction (87.8), information and communications (92.3), professional, scientific and technical services (92.3), retail and wholesale (93.0), and transportation and warehousing (95.7) fell below the baseline.

The Korea Economic Research Institute explained that as Middle East risks expand again centered on economically sensitive sectors, perceived economic sentiment has rapidly contracted.

▲ Only exports hold up…Domestic demand and financial conditions remain weak

By sector, export outlook BSI recorded 100.0, maintaining the baseline. Exports have recorded over 100 for three consecutive months, maintaining a relatively solid trend compared to other sectors.

In contrast, domestic demand at 90.8, financial conditions at 87.8, profitability at 93.5, employment at 95.0, and investment at 97.0 all fell below the baseline. Inventory was recorded at 103.3; for inventory indicators, exceeding the baseline has negative implications.

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▲ Investment expectations show partial recovery amid deepening capital shortage

Financial conditions BSI recorded 87.8, dropping to the lowest level in three years and seven months since January 2023. Oil price volatility and uncertainty are analyzed as increasing corporate financial burdens.

Meanwhile, investment BSI at 97.0 still fell short of the baseline but recorded the highest level since September 2022. This is interpreted as reflecting some revival of capital investment expectations, centered on export manufacturing sectors such as semiconductors.

▲ Middle East risks persist…Emerging as key variable in business sentiment recovery

This survey confirmed that semiconductors and some consumer sectors are supporting the corporate economy, while Middle East instability is again dampening sentiment across manufacturing and non-manufacturing sectors.

In particular, given that raw material prices, logistics cost burdens, and supply chain uncertainties are directly impacting economically sensitive sectors such as petrochemicals, machinery, and construction, analyses suggest that whether external uncertainties ease has emerged as a key variable for future corporate economic recovery.