South Korea’s expected inflation dips below 4% first time since June

[Photo by Han Joo-hyung]

South Korean consumers expect that inflation will ease next year after food and energy prices have somewhat stabilized, with recovery in overall consumer sentiment, according to data from the country’s central bank.

According to the Bank of Korea (BOK) Consumer Survey for December on Tuesday, Korean consumers’ expected inflation for the following year was down 0.4 percentage point on month at 3.8 percent in December, the lowest since 3.3 percent in May. It dipped below 4 percent for the first time since June when it recorded 3.9 percent. After peaking at 4.7 percent in July, it had been hovering around the low 4 percent range.

“Consumers’ expected inflation retreated in December after the prices of agricultural and livestock products and petroleum price have stabilized, and the Consumer Price Index retreated,” said Hwang Hee-jin, a senior official of the central bank.

Expectations for a gain in interest rates also fell 18 points from November to 133 in December. A reading above 100 means that there are more people anticipating interest rates to go higher than lower in six months.

But with a slowdown in price hike, consumers seem to feel that interest rates have somewhat peaked, making the reading fall from the previous month, according to Hwang.

[Photo by MK DB]

The estimated index for housing prices posted 62 in December, 1 point up from November after falling for five straight months since July. The rebound in December was so miniscule that it can be ignored, while the downward trend in real estate transactions still lingers in the market, explained the official.

The Composite Consumer Sentiment Index rose by 3.4 percentage points on month to 89.8, snapping the losing streak for two months in a row until November. Uncertainties from sluggish exports and global economic recessions cause concerns, but the solid job market and slowing inflation helped the rebound, according to the central bank.

Five of the six major indicators that make up the CCSI rose from a month ago, reversing from the previous month’s trend.

The index for prospective living standards added 3 points on month to 85 in December, prospective household income 2 points to 95, prospective household spending 1 point to 108, current domestic economic conditions 5 points to 51 and prospective domestic economic conditions 8 points to 62. The index for current living standards was unchanged at 83. The central bank conducted the survey targeting 2,500 households from Dec. 12 to 19.