Consumer Sentiment Rises Amid Disaster Relief Fund (Comprehensive)

Bank of Korea May Consumer Sentiment Survey
Consumer Sentiment Index Up 6.8P from Previous Month
Rebound After Four Months Due to COVID-19 Slowdown and Disaster Relief Funds
Price Perception and Expected Inflation Rate at All-Time Lows

[Asia Economy Reporter Kim Eun-byeol] Consumer sentiment, frozen by the novel coronavirus disease (COVID-19), rebounded after four months. This is analyzed to reflect the slowdown of COVID-19 spread domestically, the easing of social distancing measures, and the government's active economic stimulus policies such as the distribution of emergency disaster relief funds. However, compared to the pre-COVID-19 period, the level remains significantly low, indicating that it will take time for consumer sentiment to fully recover. Perceptions of inflation and expected inflation rates hit record lows once again.

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 marked the lowest level since December 2008 (67.7), during the financial crisis, but this month saw a rebound after four months.

Looking at detailed items, indices related to the economy and household financial conditions all rebounded simultaneously. 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, increased by 8 points to 67. The Living Conditions Outlook CSI (85) rose 6 points, 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, compared to the previous month. On the other hand, the Current Household Debt CSI (102) and Household Debt Outlook CSI (100) each fell by 2 points. The Housing Price Outlook remained at the existing level.

Kwon Cheo-yoon, head of the Statistical Survey Team at the Bank of Korea's Economic Statistics Department, explained, "Although consumers' negative perceptions of the economy have somewhat eased, economic-related indices are still significantly below 100, indicating ongoing concerns about economic downturn due to COVID-19." He forecasted that whether consumer sentiment continues its upward trend depends on the future development of COVID-19.

Perceptions of consumer price inflation over the past year and the expected inflation rate for the next year both fell by 0.1 percentage points from the previous month, standing at 1.7% and 1.6%, respectively. These are the lowest levels since the statistics began being compiled (January 2013 for inflation perception and February 2002 for expected inflation).

Team leader Kwon analyzed, "The cause is the continued low oil prices combined with the decline in domestic petroleum product prices." Although low oil prices are the cause, there are concerns that declining inflation expectations could trigger a vicious cycle (deflation) that further deepens economic slowdown. However, Team leader Kwon added, "Inflation perception is not relatively low compared to the consumer price inflation rate (4% year-on-year in April +0.1%)."

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