Consumer Prices Continue to Rise,
Focus on Stabilizing Livelihood Economy
Easing Political Risks Fuels Hopes for Recovery in Retail, Tourism, and Consumption
With the official inauguration of President Lee Jaemyung through the 6·3 regime change, expectations are rising for a recovery in consumer sentiment. Since the outbreak of the December 2024 insurrection, prices have soared, resulting in the worst domestic demand slump since the beginning of the year. In response, President Lee is expected to focus on swift policy implementation aimed at stabilizing prices and reviving the livelihood economy in the early days of his administration.
According to Statistics Korea on June 4, the Consumer Price Index (CPI) for May was 116.27, up 1.9% from the same period last year. Although the increase in the 1% range is the first in five months since December 2024 (1.9%), the detailed price trends for individual items remain concerning. Livestock product prices rose by 6.2%, marking the largest jump in 35 months since June 2022 (9.5%). By item, pork (8.4%), domestic beef (5.3%), imported beef (5.4%), and eggs (3.8%) all showed notable increases.
Processed food prices also climbed by 4.1%, adding to the burden of household grocery expenses. In particular, since the December 2024 martial law incident, more than 60 food and dining companies have raised their prices. A representative from a major food company explained, "With ongoing pressures from raw material and logistics costs, as well as rising labor costs and exchange rate instability, price adjustments became inevitable."
One of the key economic indicators, consumer sentiment, is showing signs of a rebound. According to the Bank of Korea, the Consumer Composite Sentiment Index (CCSI) for May was 101.8, up 8.0 points from the previous month. This is the largest monthly increase since October 2020 and the first time in a year that the index has surpassed the baseline of 100. After former President Yoon Sukyeol declared martial law in December 2024, consumer sentiment plummeted to 88.2, and remained in the 90s until April. The retail industry is watching closely to see if this recovery in sentiment will translate into a tangible increase in consumer spending.
The political sector has proposed large-scale fiscal spending as a solution to revive domestic demand. The Democratic Party of Korea pledged to draw up a supplementary budget of 35 trillion won immediately after the presidential election. The government also plans to establish a presidential Emergency Economic Response Task Force within this month to swiftly prepare measures for public welfare and actively respond to the domestic downturn and high inflation. A representative from a retail company said, "With political uncertainty resolved and the prospect of expanded government fiscal spending, there is a growing possibility that the retail sector will see a full recovery in the second half of the year."
Expectations are also rising for a recovery in Chinese tourist arrivals. The government is considering implementing a visa waiver for Chinese group tourists starting in the third quarter of this year. The Democratic Party has also made "improving Korea-China relations" and "resuming cultural exchanges" core pledges to boost the tourism industry.
Tourism indicators are indeed on the rise. According to the Korea Tourism Organization, the number of foreign tourists visiting Korea in the first quarter of this year was 3.87 million, up 13% from the same period last year. Industry experts believe that if this recovery continues, demand from Chinese tourists could return to pre-2016 THAAD crisis levels. A duty-free shop representative commented, "If Chinese tourists return in earnest, it will be a decisive turning point for sales recovery," adding, "There is also a possibility that demand for K-beauty and K-fashion will surge all at once."
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