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| gettyimagesbank |
By Lee Kyung-min
Korea's business inventory in the April-June period soared 18 percent from the quarter before, in what the business community is considering an indication of a full-fledged economic recession, rather than a temporary slowdown due to external factors, a survey by the Korea Chamber of Commerce and Industry (KCCI) showed, Friday.
The quarterly figure registering a back-to-back increase for the fourth consecutive quarter is the first since 2017.
Chief among the 26-year-high figures was the 79.7 percent quarter-on-quarter increase in non-metallic mineral reserves, followed by increases in oil refining (64.2 percent) and electronics and communications devices (58.1 percent).
Behind the surge in the inventory figures lies a decoupling between industrial production and output, an unusual development in the country's manufacturing that began in the latter half of this year.
The country's business conditions will, the report said, take a turn for the worse, bogged down by a slowdown in exports and subsequent widening trade deficit, compounded by tightening domestic consumer sentiment due to rising interest rates and inflation.
According to the KCCI survey of 1,400 listed firms subject to corporate financial statement disclosures, their business inventories increased to 89.1 trillion won ($63.8 billion) in the second quarter of this year, up from 61.47 trillion won in the second quarter of last year. The increase of about 27 trillion won is far greater than the 2.1 trillion won increase registered by their small- and medium-scale peers in the same period. The figure for the small firms came to 9.5 trillion won, up from 7.43 trillion won.
The KCCI stressed the importance of the country's policy measures in the quarters to come, a critical factor to curtailing a sharp fall in sales overshot by stagnant demand.
Many firms began reorienting production plans in the second quarter, the report said. However, the current months of declines in production persisting through the following quarter will push many to reduce manufacturing operation rates, which amounts to the beginning of a vicious cycle whereby excess personnel will be let go, leading to little job creation and corporate investments.
"We need programs to bolster domestic demand, certain to sag further in the quarters to come," the report said. "Fiscal and economic policy measures should be underpinned by continued structural reforms, mostly concerning deregulation and labor issues, the two most grave risks undermining corporate profitability."
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