Korean consumer sentiment dips in Aug. amid inflation, export woes

[Photo by Yonhap]

South Korean consumers have adopted a negative stance toward the overall economy for the first time in half a year, prompted by ongoing concerns over inflation and diminishing hopes of export recovery, a survey showed on Tuesday.

According to the August consumer sentiment survey by the Bank of Korea, the Composite Consumer Sentiment Index (CCSI) for the month registered a slight decline of 0.1 point, resting at 103.1 as opposed to July’s figure of 103.2. Despite sustaining readings above the 100 mark for three consecutive months, the index reversed its trend after six months, harking back to February when it endured a decline of 0.5 points.

The CCSI is derived from six key indices within the broader Consumer Survey Index (CSI), which encompasses a total of 15 indices. The six indicators include current living conditions, outlook on living conditions, household income prospects, consumer spending expectations, evaluation of the present economic landscape, and anticipations of future economic developments.

An index score exceeding 100 indicates a consumer sentiment leaning toward optimism in comparison to the long-term average spanning from 2003 to 2022. Conversely, a score below 100 reflects a sense of pessimism among consumers.

Compared to July, the indices for the outlook on living conditions and household income saw an increase of 1 point each, to 95.1 and 100.1, respectively. The indices for current living conditions and consumer spending outlook remained unchanged.

However, the current economic assessment index dropped by 3 points to 72, while the figure for the future economic outlook decreased by 4 points to 80.

“The indices related to economic conditions had been on the rise on the back of elevated expectations and positive sentiment for the second half of the year, but the recent increase in perceived inflation, risks from China, and delays in the chip market recovery have contributed to a decline in consumer confidence,” said Hwang Hee-jin, head of the economic survey team at the Bank of Korea.

The interest rate outlook index increased by 6 points over a month, rising from 112 to 118, indicating that a higher number of people anticipating an interest rate hike six months from now compared to those expecting a rate decrease.

The housing price outlook index rose by 5 points to 107. This shift suggests that more consumers anticipate a rise in housing prices one year from now, in contrast to those who predict a decline. This index has demonstrated an upward trend for nine consecutive months, after its record-low point of 61 in November last year.

The expected inflation rate remained unchanged at 3.3 percent in July. The rate had climbed to 4.0 percent in February of this year before trending downward.

The survey was conducted between the 7th to the 14th of this month and involved 2,500 households across the nation.