SME business outlook falls for 2nd straight month; July SBHI at 78.2 as construction, real estate slump

The business outlook among small and medium-sized enterprises fell for a second consecutive month, with weakness in construction and real estate pulling down overall sentiment, a survey showed.

The Korea Federation of SMEs said its Small Business Health Index for July came in at 78.2, down 1.4 points from the previous month. The federation surveyed 3,044 small and medium-sized enterprises from June 12 to June 18. A reading below 100 indicates that more businesses expect conditions to worsen than improve.

By sector, manufacturing edged up 0.2 points to 82.5, but non-manufacturing fell 2.1 points to 76.3, driving the overall decline. Construction dropped from 72.5 to 70.3, while the service sector slipped from 79.6 to 77.5.

Among subsectors, real estate posted the sharpest decline, plunging 19.4 points from 94.6 to 75.2. Arts, sports and leisure-related services also fell 9.1 points. In contrast, repair and other personal services, along with transportation, posted gains.

Within manufacturing, the divergence was equally pronounced. Leather goods and footwear rose 13.7 points, and printing and recorded media reproduction climbed 8.8 points. Industrial machinery and equipment repair tumbled 15.4 points, while the beverage sector fell 10.3 points.

Sluggish sales remained the dominant concern on the ground. In June, 53.5 percent of respondents cited declining sales as their top business difficulty, followed by rising raw materials prices at 42.2 percent, intensifying competition at 30.1 percent and higher labor costs at 26.4 percent.

Production indicators also showed stagnation. The average capacity utilization rate at small and medium-sized manufacturers stood at 75.4 percent in May, down 0.1 percentage point from the previous month. Small enterprises edged up 0.2 percentage points to 71.4 percent, while mid-sized firms fell 0.4 percentage points to 77.7 percent. Conventional manufacturers saw utilization drop 0.5 percentage points, whereas innovation-driven manufacturers gained 0.7 percentage points.