Expected inflation eases slightly in June, prices still high

[Photo by Yonhap]

South Korean consumers’ expectations for inflation gains eased in June on slowed growth in grocery prices, data showed on Tuesday.

According to the Bank of Korea’s Consumer Survey for June, consumers’ expected inflation for the following year stood at 3 percent, down 0.2 percentage point from the previous month.

The figure has hovered around 3 percent this year – 3 percent in January and February, 3.2 percent in March, 3.1 percent in April, and 3.2 percent in May.

The figure is above the inflation target of 2 percent. The last time expected inflation was in the 2 percent range was in March 2022 at 2.9 percent.

“The slowdown in the increase in prices of agricultural products and food services, as well as the decline in oil prices, appear to have contributed in part,” the central bank said.

It also added that it will take more time to see a decline in perceived inflation due to the already accumulated price increases, noting that several uncertainties including price trends, changes in international oil prices, and key interest rates of major countries will affect the trend.

The survey was conducted on 2,500 households between June 11 and June 18.

Expectations for interest rates going up went down by 6 points from the previous month to 98 in June. A reading above 100 means that more people anticipate interest rates to go up than down in six months time.

The decline in in the figure is attributed to expectations of interest rate cuts by major countries, including the United States.

The index for prospective housing prices rose 7 points to 108 in June, the highest level since 108 in October.

The composite consumer sentiment index (CCSI) for June was 100.9, up 2.5 points from the previous month.

CCSI remained above 100 from January to April before dipping to 98.4 in May. The index rebounded above 100 this month.

The CCSI is a composite index that uses six of the fifteen indexes that make up the consumer sentiment index (CSI). An index above 100 indicates that consumer sentiment is optimistic than pessimistic while vice versa for a reading below 100.

Five of the six components of the CSI gained in June from May.

The sharpest increase was in the assessment of current economic conditions, which rose 4 points to 71, while current living conditions, expectations for future living conditions and household income expectations each rose 2 points to 90, 94 and 99, respectively.

The future economic outlook increased by 1 point to 80, and consumer spending expectations remained unchanged from the previous month at 109.

The BOK said that consumer sentiment rose on the back of sustained export momentum and easing inflationary pressures.