BUSAN — Manufacturing sentiment in Busan rebounded sharply after two straight quarters of decline, helped by a weaker dollar against the won and improved raw material supply conditions. Still, more than eight in 10 local companies said they expect to fall short of the earnings targets they set for this year, citing successive interest rate increases and production cost pressures.
The Busan Chamber of Commerce and Industry released the results of its fourth-quarter 2026 Business Survey Index for the city's manufacturing sector on the 14th, based on a survey of 256 local manufacturers.
The fourth-quarter BSI came in at 88, up 24 points from 64 in the previous quarter. A reading above the neutral 100 mark means more companies view business conditions positively, while a reading below indicates the opposite. Although still below the threshold, negative expectations fell sharply as raw material supply disruptions that drove the previous quarter's decline eased and import cost burdens lightened.
Both exporters and domestic-focused companies rebounded. The index for exporters jumped 35 points from 80 in the previous quarter to 115, turning clearly positive. Larger orders for high-value vessels such as liquefied natural gas and ammonia carriers, along with rising global demand for power infrastructure, drove the gain. The index for domestic-focused companies rose 20 points from 61 to 81.
By industry, food and beverages posted the highest reading at 138, extending gains for a second straight quarter. Growing numbers of visitors to Busan lifted demand for local processed foods and duty-free goods, while major autumn events including the Busan International Film Festival and the Busan Fireworks Festival provided a boost. Electrical and electronics at 110 and shipbuilding and marine equipment at 107 also stayed above the neutral mark, benefiting from the buildout of artificial intelligence and data center infrastructure.
Sectors that struggled last quarter because of heavy reliance on imported raw materials also rebounded notably. Clothing and fur rose to 80 from 27, chemicals and rubber to 74 from 35, and textiles to 67 from 40. Machinery and equipment, including valves and hydraulic devices, climbed 62 points to 100 from 38, returning to the neutral mark on a recovery in downstream industries.
Despite the rebound in sentiment, difficult business conditions on the ground are expected to persist. Of the companies surveyed, 85.2% said they expect to miss their operating profit targets for this year, while only a small minority projected meeting them, at 10.2%, or exceeding them, at 4.6%.
Rising production costs for raw materials and energy ranked as the biggest obstacle to meeting targets, cited by 37.5% of respondents. Worsening sales and order conditions followed at 28.1%, higher labor costs and difficulty securing workers at 11.3%, and exchange rate volatility at 9.0%.
An official at the chamber's research team said manufacturing sentiment is showing signs of a rebound on the weaker exchange rate and improved supply conditions, but that companies continue to face real operating difficulties from financing costs tied to high interest rates and rising production expenses. The official said wide-ranging policy support from the central and local governments is urgently needed to stabilize raw material and energy supplies and ease financing cost burdens.