Korean consumer sentiment hits 13-month high

Slowing inflation and a post-pandemic activities recovery has seen Korea’s consumer sentiment reach a 13-month high in June, said the Bank of Korea on Wednesday.

A customer shops at a discount store in Seoul on June 2. [YONHAP]

Slowing inflation and a post-pandemic activities recovery has seen Korea’s consumer sentiment reach a 13-month high in June, said the Bank of Korea on Wednesday.

The composite consumer sentiment index (CCSI) lifted to 100.7 in June, up 2.7 points from a month earlier. It was the first time the figure broke 100 points since May last year and was the fourth consecutive monthly rise.

The CCSI measures the level of optimism that consumers have about the performance of the economy. A reading above 100 means optimists outnumber pessimists.

The Bank of Korea conducted the survey on 2,500 households for a week from June 13.

Their evaluation of the six components of the CCSI, including the current economy, economic forecast and expected spending, all increased from May.

Expectations for the eased economic slowdown, improved flow of spending on the back of expanded face-to-face activities and slowing inflation contributed to the improved sentiment, said Hwang Hee-jin, head of the Bank of Korea’s Economic Survey Team.

The Consumer Prices Index rose 3.3 percent in May from a year earlier, down from the 6.3 percent peak in July last year. The Bank of Korea Gov. Rhee Chang-yong projected consumer inflation to fall below 3 percent in June and July before it jumps back up in the following months for the annual inflation to hover around 3 percent.

Core inflation, excluding volatile food and energy prices, remains stubbornly high at 3.9 percent, slowing from the 4 percent on-year gain in April.

Inflation expectations in June remained unchanged from the previous month at 3.5 percent for the year ahead, the lowest in a year.

Higher inflation expectations can feed through to higher wage claims and rising costs.

“Costs for dining out remain high and a projected rise in public transportation fees is keeping the inflation expectations high,” Hwang added.

However, some food companies have announced slashes to product prices following government pressure. Nongshim said it will cut prices of Shin Ramyun by 4.5 percent and Shrimp Crackers by 6.9 percent starting in July. Samyang Food said it will lower the prices of 12 major products by an average of 4.7 percent starting in the same month.

A reading for interest rate forecast fell 9 points in a month to 105, meaning fewer people expect the rate to increase in the future.

Bank of Korea kept the rate unchanged at 3.5 percent in the last three consecutive meetings since January. The Federal Reserve also paused the rate hike in June after 15 months of hikes.

BY JIN MIN-JI [jin.minji@joongang.co.kr]