Consumer Sentiment Rises for Half a Year... Highest in 3 Years and 5 Months, Expected Inflation at 2.3%

Bank of Korea 'June Consumer Sentiment Survey'

[Image source=Yonhap News]

[Asia Economy Reporter Eunbyeol Kim] Consumer sentiment has continued to rise for half a year. This is the result of economic recovery expectations driven by faster-than-expected vaccination, continued export growth, and an increase in the number of employed people. As the real economy improves, concerns about inflation and rising housing prices have increased.

According to the 'June Consumer Sentiment Survey' released by the Bank of Korea on the 24th, the Consumer Confidence Index (CCSI) for this month was recorded at 110.3, up 5.1 points from the previous month. This is the highest level in 3 years and 5 months since January 2018 (110.7).

The CCSI indicates that if the value is above 100, consumer sentiment is more optimistic than the long-term average (2003?2019), and if it is below 100, it is pessimistic.

The index has shown a continuous upward trend, rising 4.2 points from 95.4 in January this year, followed by 97.4 in February, 100.5 in March, 102.2 in April, and 105.2 in May. This marks six consecutive months of increase including this month. In March, consumer sentiment turned from pessimistic to optimistic for the first time since January last year (104.8) by surpassing 100.

Most of the detailed components that make up the CCSI also showed an upward trend. The 'Consumption Expenditure Outlook CSI,' which indicates how much spending is expected to increase in the future, rose 5 points to 113. The 'Future Economic Outlook CSI,' which shows how much the economy is expected to improve, increased by 10 points to 109. The Current Economic Conditions CSI also rose 9 points to 94.

Additionally, the 'Employment Opportunity Outlook CSI,' which shows how likely employment opportunities will increase, rose 11 points to 103, and the 'Interest Rate Level Outlook CSI,' which indicates how much interest rates are expected to rise, increased 6 points to 124. This is the highest level since January 2019 (125). This reflects expectations that the base interest rate will rise as the economy recovers and prices increase.

The 'Price Perception,' which refers to the perceived increase rate of consumer prices over the past year, remained at 2.2%, while the 'Expected Inflation Rate,' which indicates the forecasted consumer price increase rate over the next year, rose by 0.1 percentage points to 2.3%. The expected inflation rate is the highest since March 2019 (2.3%).

The Housing Price Outlook CSI, which had fallen for three consecutive months from February to April (127), rose 2 points in May and 3 points this month, continuing a rebound for two consecutive months.