'COVID-19 Easing + Emergency Disaster Relief Fund'... Consumer Sentiment Rebounds After 4 Months

Bank of Korea 'May 2020 Consumer Sentiment Survey'

[Asia Economy Reporter Eunbyeol Kim] Consumer sentiment, which had frozen due to the novel coronavirus infection (COVID-19), is easing. As the spread of COVID-19 slows down domestically and social distancing measures are relaxed, consumer sentiment has rebounded after four months. It is also analyzed that the government's active economic stimulus measures, such as the emergency disaster relief fund payments, had a positive impact on consumer sentiment.

According to the Bank of Korea's 'May 2020 Consumer Sentiment Survey' released on the 26th, the Consumer Confidence Index (CCSI) for May rose by 6.8 points from the previous month to 77.6. A CCSI above 100 indicates optimistic consumer sentiment, while below 100 indicates pessimism.

The CCSI, which exceeded 100 in January this year, declined for three consecutive months starting from February (96.9), when COVID-19 began to spread, to March (78.4) and April (70.8). Last month was the lowest since December 2008 (67.7), when the global financial crisis hit, but this month it rebounded after four months.

Looking at the detailed items, indices related to the economy and household financial conditions all rebounded. The Current Economic Situation CSI, which reflects the current economic situation compared to six months ago, rose 5 points from the previous month to 36, and the Future Economic Outlook CSI, which forecasts the economy six months ahead, also increased by 8 points to 67. The Living Conditions Outlook CSI (85) rose 6 points from the previous month, and the Current Living Conditions CSI (79) increased by 2 points.

The Household Income Outlook CSI (87) and Consumption Expenditure Outlook CSI (91) each rose by 4 points. As negative perceptions of the economy eased, the Employment Opportunity Outlook CSI also rose 5 points to 63. The Current Household Savings CSI (86) and Household Savings Outlook CSI (88) increased by 2 points and 1 point respectively from the previous month. On the other hand, the Current Household Debt CSI (102) and Household Debt Outlook CSI (100) each fell by 2 points from the previous month. The Housing Price Outlook remained at the existing level.

Perceptions of the consumer price inflation rate over the past year and expected inflation over the next year both fell by 0.1 percentage points from the previous month. Price perception is at 1.7%, and expected inflation rate is 1.6%. Price perception is the lowest since January 2013, and the expected inflation rate is the lowest since February 2002.

Choe Yoon Kwon, head of the Statistical Survey Team at the Bank of Korea's Economic Statistics Bureau, explained, "Although consumers' negative perceptions of the economy have somewhat eased, economic-related indices still remain significantly below 100, indicating a low level." He added that concerns about economic downturn due to COVID-19 appear to persist. He analyzed that whether the rebounded consumer sentiment can continue its upward trend depends on the future COVID-19 situation. Kwon said, "The future Consumer Confidence Index is expected to be mainly influenced by the development of the COVID-19 spread."

Regarding the simultaneous decline in price perception and expected inflation rate, he analyzed, "The cause is the continued low oil prices combined with the decline in international petroleum prices." However, he added that price perception, which reflects the consumer price inflation rate over the past year, is not relatively low compared to the indicator price, the consumer price inflation rate (April year-on-year +0.1%).

This content was produced with the assistance of AI translation services.