Consumer sentiment returns to optimism again: Survey

[Courtesy of NH Nonghyup Hanaro Mart]

South Korea’s consumer sentiment turned optimistic again for the first time in five months in January 2024 as export and production activities picked up. While food prices remain high, consumer price expectations fell to their lowest levels in a year and 10 months as international oil prices somewhat stabilized.

According to the results of a January consumer trend survey released by the Bank of Korea (BOK) on Wednesday, the consumer sentiment index (CSI) was at 101.6 in January 2024, up 1.9 points from the previous month and the first time in five months that the index topped 100 since August 2023.

The CSI is compiled by the central bank every month based on a survey of 2,500 households nationwide on household income and economic sentiment. A reading above 100 means that more Koreans are optimistic that consumer sentiment will recover than those who are not.

“There is an increasing view that living conditions will improve as expectations for higher wages rise,” Seok Byoung-hoon, a professor of economics at Ewha Womans University, said.

A direct indicator of the recent shift in domestic demand is credit card sales. According to the card industry on Wednesday, the average daily revenue of card companies in January 2024 totaled around 2.8 trillion won ($2.1 billion), up 2.6 percent year-on-year.

The recovery in consumption is leading to retail sales. According to the retail industry, Shinsegae Department Store saw its sales from discount events and Lunar New Year gift set pre-sales in January jump 6 percent and 22 percent year-on-year, respectively.

High inflation, which weighed on the economy in 2023, is expected to recede. According to the BOK, the expected inflation rate, an outlook for consumer prices for the year ahead, fell 0.2 percentage points to 3.0 percent in January from the previous month, the lowest since 2.9 percent in March 2022.

Exports and production have also entered a recovery phase. According to the Korea Customs Service on Wednesday, the country’s exports in the first 20 days of January amounted to $33.33 billion, down 1 percent from the same period in 2023. But this was because there were 0.5 fewer working days (15.5 days) that year, and the average daily export amount increased by 2.2 percent when considering the number of working days. And if January exports increase, monthly exports will see their fourth consecutive month of increases since October 2023.

Semiconductor exports led the export recovery, rising 19.7 percent to $5.3 billion as they steadily recover since returning to growth in November 2023 for the first time in 16 months. Exports of passenger cars (2.6 percent), ships (89.8 percent), computer peripherals (24.0 percent), and home appliances (7.9 percent) also increased.

“The slight negative trend in exports for days 1 to 20 appears to be a temporary phenomenon caused by fewer working days and the concentration of customs clearance just before the Lunar New Year holiday in 2023,” according to a trade policy officer at the Ministry of Trade, Industry and Energy.

Exports to China, which had been declining for 19 consecutive months until December 2023, saw a slight increase (0.1 percent) during the period to rebound slightly.

Production activities have also rebounded. Total industrial production rose 0.5 percent month-on-month in November 2023, led by semiconductors as demand for artificial intelligence (AI) servers expanded and is on the path to recovery after fluctuating in the first half of the year and then recording the largest decline of 1.8 percent in 42 months in October. But it remains to be seen whether the early-moving economic indicators will smoothly spread to the perceived economy and according to the December business survey index (BSI) released by BOK, the industry’s overall BSI remained at 70 for three consecutive months.