NABO Industry Trends & Issues (Issue No. 75)

Published on April 24, 2025
Published by Industry & Energy Analysis Division

■ Industry Trends
   Recently, the Korean economy has shown a modest upward trend on the back of increased exports in the key manufacturing sector and seasonal growth in the service sector. However, downward pressures persist due to external uncertainties, weakened domestic consumption sentiment, and a slump in the construction sector.
   In February 2025, overall industrial production rose by 1.2% year-on-year (YoY), driven by a 7.1% increase in the manufacturing sector. In March, exports from Korea’s 13 major industries totaled USD 45.44 billion (up 1.6% YoY), as semiconductor exports rebounded and shipbuilding and IT exports (including computers, peripherals, and wireless communication devices) saw growth.
   Energy and crude oil prices in February fell by 8.4% YoY, with global supply expected to rise following the easing of OPEC+ production cuts starting in April. Non-ferrous metal prices rose 3.0% YoY, driven mainly by aluminum, copper, and zinc, while iron ore and nickel prices declined by 15.5% and 6.4% YoY, respectively, amid concerns over weakening demand in China’s steel industry and oversupply. Agricultural commodity prices, excluding corn, dropped by 17.2% YoY due to improved yields and reduced demand for soybeans, wheat, and rice.
   In February, the volume of Korean Allowance Units (KAU24) traded under the national emissions trading scheme (ETS) fell by 90% month-on-month (MoM) to 1.159 million tons, with a closing price of KRW 9,490 per ton, representing a 1.7% decline over the same period. The decline was primarily driven by the relaxation of emission allowance carryover limits, from threefold to fivefold net sales starting in 2025, which reduced corporate demand for trading. In the recyclable resource market, the prices of post-consumer paper, plastics (excluding compressed PET and EPS ink-coated products), and white glass bottles declined, while the prices of post-consumer tires remained largely unchanged and scrap metals (excluding steel cans) trended upward MoM.
   In the housing market, the February home sales price index decreased by 0.06% MoM, with most regions other than Seoul showing a downward trend, whereas the rental price index increased by 0.03% over the same period due to seasonal demand increases.

■ Industry Issue: Building the SEPU Index: Quantifying Economic Policy Uncertainty for Small Businesses
   The surge in domestic and global economic uncertainty to unprecedented levels is directly affecting the business environment for small- and medium-sized enterprises. In particular, the existing Business Survey Index (BSI) for small businesses has exposed limitations in supporting swift responses, underscoring the need for more timely and quantitative indicators. In response, the new Small-business Economic Policy Uncertainty (SEPU) index has been developed to analyze the impact of uncertainty on the economic activities of small business owners. The SEPU is a news-based indicator constructed from approximately 34 million domestic news articles, focusing on keywords related to policy, economy, and uncertainty. While the SEPU index exhibits trends similar to the existing Economic Policy Uncertainty (EPU) index, it also captures the unique characteristics of policies targeting small businesses, enhancing its distinct value.
   Empirical analysis indicates that increases in the SEPU index are associated with significant short-term declines in retail sales. These drops in small business revenues are interpreted as reflecting weakened consumer sentiment. Moreover, the responses to SEPU shocks are more pronounced than to those associated with the existing EPU index, suggesting that the SEPU serves as a more direct and effective tool for capturing real economic changes facing small business owners. However, as the SEPU index is influenced by the frequency of media coverage,it should not be viewed as a direct cause of changes in real economic conditions, but rather as a supplementary measure of small businesses’ sensitivity to policy shifts. To enhance the SEPU index’s reliability and practical utility, ongoing efforts are needed to refine keyword selection to maintain representativeness and objectivity, as well as to conduct integrated analyses with real economic indicators related to small businesses.