Consumer sentiment climbs on rate cut hopes and export optimism

Korea’s consumer sentiment rose for the second straight month in January amid expectations for rate cuts, slowing inflation and improving exports.

People shop at a supermarket in Seoul on Jan. 23. Korea’s consumer sentiment rose for the second straight month in January amid expectations for rate cuts, slowing inflation and improving exports. [NEWS1]

Korea’s consumer sentiment rose for the second straight month in January amid expectations for rate cuts, slowing inflation and improving exports.

The composite consumer sentiment index (CCSI) stood at 101.6 in January, up from 99.7 the previous month, according to Bank of Korea (BOK) data on Wednesday.

A reading above 100 means optimists outnumber pessimists. The survey was conducted on 2,500 households nationwide from Jan. 9 through 16.

It was the first time the figure stood above 100 since August.

“There is slowing consumer inflation and a drop in the cost of living, with petroleum products and processed food falling,” said Hwang Hee-jin, head of BOK’s Economy Survey Team. “But whether the trend will continue remains questionable as the prices of agricultural products and outdoor dining remain high and the outlook for global oil prices remain uncertain due to geopolitical risks.”

Inflation expectations fell this month from the previous month as consumer prices continued to show a downward trend.

Ordinary people expect consumer prices to increase 3 percent for the year ahead, down from 3.2 percent in the previous month.

Inflation expectations are important as their upward movement can cause businesses to raise product and service prices and cause workers to demand pay raises, putting pressure on inflation.

Consumer prices rose 3.2 percent in December from a year earlier, compared to 3.3 percent in November and 3.8 percent in October. It has been generally falling after peaking at 6.3 percent in July 2022.

The BOK Gov. Rhee Chang-yong said earlier in January that keeping a restrictive monetary policy for a considerable time would be important to stabilize prices, as the board kept the rates unchanged at 3.50 percent for an eighth straight meeting.

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