Korean consumer confidence at 3-yr high, inflation, rate hike anticipations build up

[Photo by Park Hyung-ki]

South Korean consumers have turned most positive about the economy since early 2018 in June along with expectations for buildup in inflation and rates.

The composite consumer sentiment index (CCSI) touched 110.3 in June, gaining 5.1 points from a month earlier and highest reading since January 2018, according to Bank of Korea data on Thursday.

The CCSI has been on the upward trajectory since January this year and has stayed above 100 since March. A reading above 100 means people are more optimistic than pessimistic about economic conditions, and vice versa for below 100.

The composite index plunged to 70.8 in March last year upon the Covid-19 outbreak, the lowest since the wake of global financial crisis.

Progress in vaccine program and faster economic recovery have boosted sentiment, said Hwang Hee-jin, head of BOK’s statistics team.

All six major indicators came above the long-term average, suggesting that the economy is on the recovery track, Hwang added.

Index showing consumers’ expectation for future living conditions gained 2 points to 99, the strongest since June 2018. That for household income outlook also rose 2 points to 100, the highest since January 2020.

Consumers’ confidence for job opportunities improved as well with related index jumping 11 points to 103, the best since November 2017. The country added over 600,000 new jobs in April and May.

Consumer expectations for higher rates and housing prices all increased in line with improving economic outlook.

Expectations for interest rate going up rose 6 points to 124, the highest since January 2019 as rationale for monetary tightening builds up due to inflated prices and asset market.

Consumers’ perceived inflation over the past one year was 2.2 percent, unchanged from a month ago. Expected inflation for the following year was up 0.1 percentage point on month to 2.3 percent The outlook for consumer prices gained 1 point to 147 and the one on housing prices 3 points to 127. .

The central bank’s survey on consumer sentiment was taken from June 10 to 17.

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