August Consumer Sentiment Decline Narrows... Expected Inflation at 2.4%, Highest in 2 Years 8 Months

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] The decline in consumer sentiment, which had dropped after the 4th wave of COVID-19, narrowed in August. Due to the learning effect regarding the COVID-19 situation and the impact of vaccinations, the degree of contraction in consumer sentiment is gradually decreasing.

According to the "August 2021 Consumer Sentiment Survey Results" announced by the Bank of Korea on the 24th, the Consumer Confidence Index (CCSI) in August was 102.5, down 0.7 points from the previous month. The July CCSI had dropped for the first time this year due to the 4th wave of COVID-19, but the decline narrowed in August.

During the first wave of COVID-19 last year (February to April), consumer sentiment fell by 31.5 points over three months; during the second wave in September, it dropped by 8.3 points, and in December by 7.8 points. The decline in consumer sentiment due to the 4th wave is similar to that during the 3rd wave.

Hwang Hee-jin, head of the Bank of Korea's Statistics Survey Team, said, "There was an adaptation effect from having already experienced COVID-19, and the amount of movement during the August vacation season did not decrease as much as expected," adding, "Consumer spending was also less affected than anticipated." He further explained, "The vaccination rate remained around 30% before rapidly increasing, which also influenced movement and sentiment."

The CCSI is composed of six indices, including current living conditions and outlook, household income and expenditure outlook, current economic assessment, and future economic outlook. The indices for current living conditions and outlook remained at the same level as in July, and the household income outlook (99) rose by 1 point.

The Interest Rate Level Outlook CSI (126) maintained a high level as in the previous month, reflecting expectations of a base interest rate hike within the year, and the Housing Price Outlook CSI (129) remained unchanged from the previous month as the nationwide apartment sale prices continued to rise.

The expected inflation rate, which shows the anticipated inflation rate over the next year, was 2.4%, and the perceived inflation rate over the past year was also 2.4%, each rising by 0.1 percentage points. The expected inflation rate recorded its highest level since December 2018 (2.4%).