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South Korea Business:  confidence in South Korea edged lower in January, reflecting growing caution among companies even as the country’s export performance remained firm. A monthly survey by the central bank showed that fading seasonal effects weighed on sentiment in service-oriented industries, offsetting gains seen among manufacturers.

Overall Business Sentiment Slips Marginally

The Composite Business Sentiment Index for all industries stood at 94 in January, down 0.2 points from December, according to the latest survey released by the Bank of Korea. The index had climbed for two straight months and reached 94.2 in December, its strongest reading since July 2024, before easing slightly at the start of the new year.

A CBSI reading below 100 indicates that more firms hold a pessimistic outlook than an optimistic one. While the decline was modest, it signaled that the broader business environment remains under pressure despite pockets of resilience.

Diverging Fortunes Between Manufacturers and Service Firms

The survey revealed a clear split between manufacturing and non-manufacturing sectors. Sentiment among manufacturers improved notably, with their index rising 2.8 points to 97.5. In contrast, confidence among non-manufacturers dropped sharply, falling 2.1 points to 91.7.

Central bank officials attributed the contrasting trends largely to differences in recent demand conditions. Export-oriented manufacturers benefited from steady overseas orders, which helped lift expectations for production and sales. Service providers, however, faced a slowdown as temporary boosts seen at the end of last year began to fade.

Seasonal Factors Lose Their Impact

According to the Bank of Korea, the decline in non-manufacturing sentiment was closely linked to the disappearance of year-end effects. In December, retail and leisure-related businesses enjoyed stronger activity due to factors such as large-scale discount events and increased travel.

Promotional campaigns, including Black Friday-style sales, and a rise in visitors from China during the winter holiday season had supported consumer spending toward the end of 2024. As those one-off drivers subsided in January, service-sector firms reported weaker conditions and more cautious expectations.

Scope and Method of the Survey

The business sentiment survey was conducted earlier this month and included responses from 3,255 companies across the country. Of those surveyed, 1,815 were manufacturing firms, with the remainder drawn from a wide range of service and construction industries.

The central bank uses the survey results to gauge corporate perceptions of current conditions and future outlooks, making it a closely watched indicator for policymakers and investors assessing near-term economic momentum.

Stock Market Rallies Despite Trade Concerns

In a separate development, South Korean equities posted strong gains late Tuesday morning, defying renewed concerns over potential trade friction with the United States. After opening lower, the benchmark Korea Composite Stock Price Index surged 67.56 points, or 1.36 percent, to reach 5,017.15 by 11:20 a.m.

The rally came despite comments from U.S. President Donald Trump, who warned of higher tariffs on certain South Korean imports, including automobiles. In a social media post, Trump said he planned to raise reciprocal and auto-related tariffs on South Korea to 25 percent from 15 percent, citing delays in the country’s domestic approval process for a bilateral trade agreement.

Investor Confidence Holds Firm

Market participants appeared to view the tariff threat as a short-term source of volatility rather than a trigger for sustained weakness. Investors largely set aside the renewed uncertainty, betting that negotiations would continue and prevent lasting damage to trade ties.

Technology stocks led the advance, helping drive the broader market higher. Analysts noted that the strong performance suggested underlying confidence in corporate earnings and economic fundamentals, even as external risks remained on the horizon.