The Decline Is Greater Than During the Financial Crisis
[Asia Economy Reporter Eunbyeol Kim] Consumer sentiment in March recorded the largest monthly decline since monthly statistics began being compiled in July 2008. The significant impact was due to the worsening of both economic-related indices and household financial situation indices amid the COVID-19 pandemic.
According to the "March Consumer Sentiment Survey Results" released by the Bank of Korea on the 27th, the Consumer Confidence Index (CCSI) for this month was 78.4, down 18.5 points from the previous month. This monthly drop in the consumer sentiment index is the largest since the Bank of Korea started compiling monthly statistics in July 2008. The CCSI was the lowest since March 2009 (72.8), when the effects of the global financial crisis were severe.
The monthly decline was greater than during October 2008 (-12.7 points) when the global financial crisis hit, March 2011 (-11.1 points) when the Great East Japan Earthquake and Fukushima nuclear accident occurred, June 2015 during the MERS outbreak, and February this year (-7.3 points) when the COVID-19 situation began.
During the 2008 financial crisis, the CCSI in October dropped sharply to 77.9 (-12.7 points from the previous month), then fell an additional 10.2 points over the next two months before rebounding in January 2009. During the 2015 MERS outbreak, the CCSI dropped 7.3 points in June and began to rebound from July, continuing an upward trend until November. In contrast, COVID-19 is currently showing a sharp decline for the second consecutive month following last month.
As COVID-19 spread domestically, consumer sentiment was first weakened, and as it spread globally, financial markets also became unstable. Not only did the detailed components that make up the index fall sharply, but outlooks on employment opportunities, wages, inflation rates, and interest rate levels deteriorated across the board.
Dark clouds have gathered over economic conditions sentiment. The Current Economic Situation CSI, which reflects how consumers view the current economic situation, fell by 28 points to 38, and the Future Economic Outlook Index also dropped 14 points to 62. This indicates that consumers expect COVID-19 to cause significant damage to the Korean economy.
The Consumer Spending Outlook CSI and Household Income Outlook CSI fell by 13 points and 10 points, respectively, recording 93 and 87. The Current Living Conditions Index dropped 8 points to 83, and the Living Conditions Outlook Index fell 10 points to 83, showing a worsening perception of household financial conditions.
The Employment Opportunity Outlook Index fell by 17 points to 64, marking the lowest level since March 2009. The Interest Rate Level Outlook dropped 20 points, the lowest since July 2008. The Wage Level Outlook also fell 7 points, the lowest since July 2008.
The expected inflation rate, which indicates the consumer price inflation outlook for the next year, was 1.7%, matching the previous month's record low.
Consumers' perception of how much prices have risen over the past year, the inflation perception, remained at 1.8%, the same as a month ago.
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