South Korea’s business sentiment stalled amid Middle East conflict concerns

South Korea’s manufacturing and export-oriented businesses displayed less optimism in June than domestic and retail-related businesses amid conflicts in the Middle East and ongoing uncertainty surrounding US trade policy -- coming in largely unchanged at 89.4 versus 89.5 in May. Domestic-focused businesses showed increased optimism (90.9 in June compared to 90.5 in May), while those centered on exports demonstrated a decline in sentiment (96.7 in June compared to 97.9 in May). We believe that the domestic-demand driven-recovery is likely to continue as suggested by the big improvement in consumer sentiment.

Overall, the data reveals contrasting views between domestic and export-focused businesses, shaped both by local and international events. The optimism among domestic-focused businesses is a positive sign for the internal market, suggesting a potential improvement in consumer-led growth. However, the cautious approach by export-oriented businesses highlights the persistent concerns regarding geopolitical tensions and trade policies.