Expected Inflation Falls to 3.2%, Down 0.2%p from Previous Month... Lowest in 20 Months
Expectations for the end of the U.S. Federal Reserve's (Fed) tightening policy have grown, and with an improvement in export conditions, the Consumer Sentiment Index rose for the first time in five months.
According to the December Consumer Sentiment Survey released by the Bank of Korea on the 27th, the Consumer Sentiment Index (CCSI) increased by 2.3 points from the previous month to 99.5. The CCSI is a psychological indicator calculated using six major indices from the Consumer Sentiment Index (CSI), and a value below the long-term average benchmark (100) indicates pessimism.
The CCSI had shown a decline for four consecutive months from August (103.1), September (99.7), October (98.1), to November (97.2), but rebounded this month after five months. The consumer sentiment, which had been frozen due to the impact of interest rate hikes, is interpreted as showing signs of recovery due to the Fed's possibility of rate cuts next year, improvement in export conditions, and a slowdown in inflation.
The Interest Rate Level Expectation Index fell by 12 points in one month to 107, marking the largest drop since February this year. This is largely attributed to the stabilization of market interest rates, which had been rising, due to expectations of the end of U.S. rate hikes. For the same reason, the Interest Rate Level Expectation Index also dropped by 9 points last month.
The Housing Price Expectation Index decreased by 9 points to 93. This is due to expectations of strengthened loan regulations and continued high interest rates, which have caused the nationwide housing price increase to slow for two consecutive months and transaction volumes to remain sluggish.
The Inflation Level Expectation Index fell by 3 points from the previous month to 146. This decline is due to a wider drop in petroleum prices, which has slowed the consumer price inflation rate. Recently, international oil prices have stabilized amid concerns over a global economic slowdown in China and other countries, as well as reduced crude oil demand, reflecting an 11-week downward trend in petroleum prices.
The expected inflation rate, which forecasts consumer price increases over the next year, dropped by 0.2 percentage points from the previous month to 3.2%, marking the lowest level in one year and eight months. After rising for the first time in eight months in October, the expected inflation rate remained steady last month but declined this month due to increased expectations of economic and inflation slowdown.
The response proportions for major items expected to affect consumer price increases over the next year were public utility charges (65.2%), agricultural, livestock, and fishery products (43.5%), and petroleum products (25.3%). Compared to the previous month, the response proportions increased for agricultural, livestock, and fishery products (+4.1 percentage points) and personal services (+3.6 percentage points), while the proportion for petroleum products decreased (-12.6 percentage points).
Hwang Hee-jin, head of the Statistical Survey Team at the Economic Statistics Bureau, explained, "Since the inflation rates for agricultural products and dining out remain high, and the possibility of public utility fee increases and volatility in international oil prices pose latent uncertainties, it remains to be seen whether the decline in expected inflation will continue as a trend."
As international oil prices have fallen for 11 consecutive weeks, gasoline is being sold at 1,559 won per liter and diesel at 1,499 won per liter at a gas station in Seoul on the 26th. Photo by Jinhyung Kang aymsdream@
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