Consumer Sentiment Plummets After 7 Months... Inflation Perception and Housing Price Outlook Rise ↑

Bank of Korea 'July 2021 Consumer Sentiment Survey'

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] Consumer sentiment has plummeted for the first time in seven months due to the impact of the 4th wave of COVID-19.

According to the 'July 2021 Consumer Sentiment Survey' released by the Bank of Korea on the 28th, the Consumer Confidence Index (CCSI) in July recorded 103.2, down 7.1 points from the previous month. This is the first decline in seven months since December last year (91.2, down 7.8 points).

The CCSI had steadily risen by 19.1 points over the past six months this year, supported by ongoing vaccination efforts and strong exports. However, with the onset of the 4th wave of COVID-19 and the escalation of social distancing measures this month, the trend reversed to a decline.

The CCSI is a sentiment indicator calculated using six major indices of the Consumer Sentiment Index (CSI), with the long-term average (January 2003 to December 2020) set as the baseline value of 100. A value above 100 indicates optimism compared to the long-term average, while below 100 indicates pessimism.

All six major indices showed a downward trend. The Current Living Conditions CSI (91) and Living Conditions Outlook CSI (96) fell by 2 points and 3 points respectively from the previous month. The Household Income Outlook CSI (98) and Consumption Expenditure Outlook CSI (108) dropped by 2 points and 5 points respectively. The Current Economic Conditions CSI (82) and Future Economic Outlook CSI (92) declined sharply by 12 points and 17 points respectively from the previous month.

However, the decline in CCSI was smaller compared to the 31.5-point drop from February to April last year during the 1st wave of COVID-19, the 8.3-point drop during the 2nd wave (September last year), and the 7.8-point drop during the 3rd wave (December last year). Hwang Hee-jin, head of the Statistical Survey Team at the Economic Statistics Bureau, said, "Although the number of confirmed cases in the 4th wave is higher and social distancing levels have increased, the social distancing measures are somewhat relaxed compared to last year." He added, "The ongoing vaccination efforts are also a factor in the smaller decline in consumer sentiment compared to last year."

The Employment Opportunity Outlook CSI (87) fell by 16 points as expectations for economic recovery worsened due to the COVID-19 pandemic, while the Interest Rate Level Outlook CSI rose 2 points to 126 after the Bank of Korea mentioned the possibility of raising the base interest rate within the year.

With the continued rise in nationwide apartment sale prices, the Housing Price Outlook CSI increased by 2 points to 129. This is the highest level since February (129), after a slight decline earlier this year followed by three consecutive months of increase.

Meanwhile, the perception of the consumer price inflation rate over the past year rose by 0.1 percentage points from the previous month to 2.3%. The expected inflation rate for the next year remained unchanged at 2.3%.