South Korean companies' economic sentiment improved slightly in July.

Manufacturing sentiment centered on semiconductors showed a clear recovery, leading to a rise in the overall Corporate Business Survey Index (CBSI), while non-manufacturing sectors including services remained below the baseline, continuing the divergence among industries.

The Economic Sentiment Index (ESI) also improved, but fell short of the long-term average of 100, indicating that both businesses and consumers maintain cautious views on economic conditions.

▲ Manufacturing leads rebound in corporate sentiment

According to the Bank of Korea's "July 2026 Corporate Business Survey Results and Economic Sentiment Index (ESI)" released on the 30th, the all-industry CBSI for July stood at 98.5, up 0.8 points from the previous month.

The outlook index for the following month also rose 1.3 points to 96.5, showing a modest recovery in business expectations regarding economic conditions.

However, since the corporate business sentiment index means optimistic sentiment above 100 and pessimistic sentiment below 100 based on the long-term average, overall corporate sentiment remained below the average.

▲ Manufacturing exceeds baseline…New orders and business conditions improve

The manufacturing CBSI rose 2.0 points to 103.2 from the previous month, exceeding the baseline of 100.

The outlook for the following month also recorded 100.5, indicating that the manufacturing sector's economic improvement trend would continue.

The Bank of Korea analyzed that improved new orders and business conditions led the rise in manufacturing sentiment.

New orders contributed 0.8 points and business conditions contributed 0.7 points to the rise in the corporate business sentiment index, showing that the recovery of export-oriented manufacturing centered on semiconductors lifted companies' perceived economic conditions.

The CBSI of export-oriented companies rose to 107.5, and large enterprises recorded 105.3, showing notable improvement in sentiment among export-focused companies.

Building [Free image]

▲ Non-manufacturing sectors pause amid worsening financial conditions

Meanwhile, the non-manufacturing corporate business sentiment index fell 0.2 points to 95.2 from the previous month. The outlook for the following month improved slightly to 93.7 but remained significantly below the baseline.

Worsening financial conditions served as the largest factor in the decline, and the service sector CBSI also fell to 95.3 from the previous month. This indicates that amid insufficient domestic demand recovery, cost burdens and financial conditions constraints are limiting sentiment across non-manufacturing sectors.

▲ Raw material prices top concern for manufacturing, weak domestic demand for services

Management challenges felt by companies also showed differences by industry.

Manufacturing ranked "rising raw material prices (21.8%)" as the biggest management concern, followed by "uncertain economic conditions (20.6%)" and "weak domestic demand (16.4%)". However, while raw material price burdens eased somewhat from the previous month, concerns about economic uncertainty actually expanded.

In non-manufacturing, "weak domestic demand (18.4%)" was identified as the largest burden, followed by uncertain economic conditions (17.8%) and labor shortages and rising labor costs (13.5%). This result shows that the service sector remains highly sensitive to the pace of domestic demand recovery.

▲ Economic sentiment index rises…still below average

The Economic Sentiment Index (ESI), which reflects both business and consumer sentiment, rose 1.1 points to 97.9 from the previous month. The ESI cyclical component, which shows the cyclical flow of the economy, also rose 0.2 points to 95.9.

However, since the ESI also falls below the baseline of 100, both businesses and consumers have not yet reached the level of perceiving economic recovery. The Bank of Korea explained that an ESI below 100 means economic sentiment is more pessimistic than the long-term average.

In other words, while exports and semiconductor-related business conditions led the improvement, domestic demand and financial conditions remained as variables constraining the pace of economic recovery.