Business sentiment among South Korean manufacturers improved for a second straight quarter, led by export-strong sectors such as semiconductors and cosmetics. Still, six in 10 manufacturers expect to fall short of their operating profit targets this year, showing that rising raw material and energy costs continue to weigh heavily on operations.
The Korea Chamber of Commerce and Industry said on the 27th that its Business Survey Index for manufacturing in the fourth quarter of 2026 came in at 86, up 6 points from 80 in the previous quarter. The survey covered 2,413 manufacturers nationwide.
The index for exporters rose 5 points from the prior quarter to 91, supported by strong overseas shipments of key products including semiconductors and cosmetics. The reading for companies focused on the domestic market climbed 7 points to 85, helped by easing costs for imported raw materials as the won stabilized. It was the first time in five quarters, since the third quarter of 2025, that both readings rose together.
More sectors expect conditions to improve next quarter. Only one sector, semiconductors at 113, topped the neutral level of 100 in the previous quarter, but five did in the fourth quarter: semiconductors, cosmetics, medical precision instruments, shipbuilding and pharmaceuticals and biotech. Semiconductors posted 139, the highest since the survey began, exceeding the neutral level for a fourth consecutive quarter. Electronics and telecommunications, by contrast, fell 13 points from the prior quarter to 80, hurt by higher prices for memory chips, copper clad laminate and copper as well as rising logistics costs.
Production costs remain a burden, the survey showed. A total of 60.4% of companies expect this year's operating profit to fall short of the targets they set early in the year. Another 31.7% said they would meet their targets, while just 7.9% expect to exceed them, combining the 6.4% projecting an overshoot of less than 10% and the 1.5% expecting to beat targets by a wide margin. Asked about the biggest obstacle to meeting their targets, 43.2% cited rising production costs such as raw materials and energy, followed by worsening sales and order conditions at 24.9%, higher labor costs and difficulty hiring at 11.7%, and exchange rate volatility at 6.8%.
"Rising production costs such as raw materials and energy emerged as the biggest difficulty for companies, so policy support is needed to improve business conditions, including stabilizing raw material supplies and easing energy cost burdens," said Kang Min-jae, head of the economic policy team at the Korea Chamber of Commerce and Industry.
