South Korean manufacturers' business confidence inched down for February on concerns that rising raw material prices could crimp their profitability, the central bank said Monday.
The index of manufacturers' outlook on business conditions reached 91 for February, down from 92 for January, according to the Bank of Korea (BOK). The index measures manufacturers' outlook on business conditions for the coming month.
The sentiment index stayed below the benchmark 100 for the fifth straight month, indicating that pessimists outnumber optimists. The index is based on a nationwide survey of 2,436 companies conducted between Jan. 18-25.
"Local manufacturers were concerned that a hike in raw material prices could eat into their profitability," said Son Won, an economist for the BOK.
The index measuring manufacturers' assessment of current business conditions reached 90 in January, down from 92 in December and the lowest level since December 2009, the BOK said.
A sub-index gauging an outlook for purchasing prices of raw materials came in at 133 for February, up from 126 for January and the highest level since 157 for August 2008, the BOK added. The index measuring the cost of buying raw materials hit a 29-month high of 136 in January, up 11 points from the previous month.
South Korea is facing growing inflationary risks as the economic recovery and rising raw material prices are exerting upward pressure on consumer prices.
The BOK earlier predicted that South Korea's economic growth will slow to 4.5 percent this year, down from a 6.1 percent expansion last year. But it raised its inflation projection for 2011 to a three-year high of 3.5 percent from a 2.9 percent advance last year.