Expected inflation in Korea back up to 4.3%, consumer sentiment dips under 90 Oct

[Photo by Lee Chung-woo]

South Korean consumer expectations for the inflation rate in the following year rose to 4.3 percent after two months of easing in October on concerns for protracted energy crisis after OPEC + decision to cut output ahead of colder season.

The survey was conducted on 2,321 households between October 7 and 17.

Consumers’ expected inflation for the following year hit an all-time high of 4.7 percent in July and eased to 4.3 percent in August and 4.2 percent in September.

“Inflation is still high at above 5 percent and electricity and gas fees rose in October on crude output decision,” said Hwang Hee-jin, an official from BOK. “Expected inflation rose also as external elements such as U.S. rate hike and strong dollar had psychological impact.”

Expectations for interest rates going higher rose by 3 points to 150 in October. A reading above 100 means that there are more anticipating interest rates to go higher than lower in six months time. A higher reading in October means that more people expected interest rates to go up than in September.

The index for prospective housing prices fell 3 points to an all-time low of 64 in October as apartment sales price and buying sentiment continued to fall. The reading suggests that more people expected housing prices to fall after one year.

The composite consumer sentiment index (CCSI) was 88.8 in October, down 2.6 points from a month ago, the first fall in three months after rising to 88.8 in August and 91.4 in September from 86 in July.

A reading above 100 means people are more optimistic than pessimistic about the economy and vice versa for a reading below 100.

Five of major indicators that make up the CCSI fell in October from the previous month.

The index for prospective household spending rose 1 point from September to 110 in October while that for current living standards fell 2 points to 83, prospective living standards 2 points to 84, prospective household income 2 points to 94, current domestic economic conditions 3 points to 47, and prospective domestic economic conditions 6 points to 56.

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