News Sentiment Index Plummets Amid US Recession Concerns

News Sentiment Index Falls Below Long-Term Average Since Black Monday
Slight Rise Amid Eased US Recession Concerns

Economic sentiment among South Korean citizens has become the most negative in 1 year and 8 months. This is interpreted as a reflection of market anxiety following the simultaneous plunge of domestic and international stock indices last week due to concerns over a recession in the United States.

According to the Bank of Korea's Economic Statistics System (ECOS) on the 14th, the news sentiment index for the first week of August was 93.54, down 13.12 points from the previous month (106.66). This is the lowest level in 1 year and 8 months since December 2022 (83.07), when concerns over a domestic economic recession grew due to a trade deficit. It is estimated that this result reflects the aftermath of the 'Black Monday,' when domestic and international stock indices plunged simultaneously amid spreading fears of a recession following the slowdown in U.S. employment data last week.

The news sentiment index announced by the Bank of Korea is an experimental statistic that quantifies economic sentiment appearing in economic news articles. It publishes daily and monthly indices every Tuesday, reflecting data from the past week. Using big data and other methods, sample sentences are extracted from articles and classified by machine learning into positive, negative, or neutral sentiments.

With the long-term average from 2005 to 2023 set at 100, an index above 100 is interpreted as an improvement in economic sentiment among businesses or households. Conversely, an index below 100 indicates a deterioration in economic sentiment.

This year, the news sentiment index has consistently exceeded 100 due to expectations for semiconductor exports and government value-up support measures. The index, which was below 100 at 95.5 in January, exceeded 100 for six consecutive months in February (107.89), March (110.65), April (107.84), May (109.46), June (109.38), and July (106.66).

Looking at the daily news sentiment index, it was above 100 at 103.58 on the 2nd, before the global stock market plunge began. However, from the 5th (99), it started to fall below 100, continuing to decline for five consecutive days on the 6th (93.83), 7th (92.61), 8th (92.12), and 9th (91.38). On the 12th, the index rose to 95.54 as concerns over a U.S. recession somewhat eased.

A Bank of Korea official explained, "The news sentiment index rebounded on the 12th as news emerged that the Financial Services Commission would begin providing liquidity support to affected companies related to delayed T-Mef settlements, and the U.S. unemployment rate indicator improved, easing recession fears."

Examining periods of large fluctuations in the recent news sentiment index, the index plunged 19.03 points from 116.93 on April 5 to 97.9 on April 17 amid reports of escalating Middle East tensions due to clashes between Iran and Israel. In early July, the index dropped 15.6 points from 116.42 on July 8 to 100.82 on July 17, following reports criticizing the minimum wage decision alongside heavy rains.