July Consumer Sentiment Rises for 3rd Month... Housing Price Outlook Nears All-Time High

Bank of Korea 'July 2020 Consumer Sentiment Survey'

[Asia Economy Reporter Eunbyeol Kim] Although the number of confirmed cases of the novel coronavirus infection (COVID-19) continues to rise, consumer sentiment has increased for three consecutive months, supported by proactive policy responses. However, despite the government's announcement of stringent measures, expectations that real estate prices will rise have continued, pushing the housing price outlook sentiment to the brink of setting an all-time high.

According to the 'July 2020 Consumer Sentiment Survey' released by the Bank of Korea on the 28th, the Consumer Confidence Index (CCSI) for this month was recorded at 84.2, up 2.4 points from June.

The CCSI is an indicator calculated using six of the 15 indices that make up the Consumer Sentiment Index (CSI): current living conditions, expected living conditions, expected household income, expected consumption expenditure, current economic conditions, and expected economic conditions. A value below 100 indicates pessimism in consumer sentiment compared to the long-term average (2003?2019). Although the absolute CCSI remains below 100 and thus pessimistic, consumer sentiment has shown improvement for three consecutive months.

However, the month-on-month increase in the CCSI has slowed, with rises of 6.8 points in May, 4.2 points in June, and 2.4 points this month. Kwon Cheo-yoon, head of the Statistical Survey Team at the Bank of Korea's Economic Statistics Bureau, stated, "Proactive policy responses such as emergency disaster relief funds have somewhat boosted consumer sentiment, but as the effect diminishes, the rate of increase is shrinking. Future consumer sentiment is expected to be influenced by additional responses or the COVID-19 situation."

As the public feels that the economy, which had been depressed by COVID-19, is improving, the current economic conditions CSI rose 5 points from the previous month to 49. The current living conditions CSI compared to six months ago also increased by 1 point to 85.

The expected household income CSI and expected consumption expenditure CSI each rose 2 points from the previous month to 90 and 95, respectively. The expected living conditions, expected economic conditions, and expected employment opportunities CSI all remained steady, unchanged from the previous month. The expected interest rate level CSI rose 6 points to 88. Since the base interest rate has already dropped to a historic low, the rise in the expected interest rate level is believed to reflect expectations that rates will not fall further. However, the expected interest rate level CSI remains below 100.

Despite the government's stringent real estate measures last month and this month, nationwide apartment sale prices have risen, causing the housing price outlook CSI to increase again. After soaring 16 points last month?the largest increase in 21 months since September 2018 (+19 points)?this month it rose 13 points to 125. This is only 3 points shy of the all-time high of 128 in September 2018. Team leader Kwon said, "If this upward trend continues, an additional increase of about 3 points (breaking the all-time high) seems possible. Despite the government's strong measures, housing demand still exceeds supply, and actual prices are rising, which is believed to have influenced the housing price outlook CSI."

The expected wage level CSI and expected price level CSI rose 5 points and 3 points to 110 and 135, respectively.

Household savings and debt conditions were largely unchanged from last month. The current household savings CSI (88) and expected household savings CSI (91) both maintained previous levels. The current household debt CSI (102) also remained steady, while the expected household debt CSI (100) rose 1 point from the previous month.

The perceived inflation rate, representing the consumer price increase felt over the past year, remained at 1.7%, the same as the previous month. The expected inflation rate, which corresponds to the forecasted consumer price increase over the next year, rose by 0.1 percentage points to 1.7%.

Regarding major items expected to affect consumer prices over the next year, 41.5% cited rent. This was followed by public utility charges (33.7%) and agricultural, livestock, and fishery products (32.0%).

This survey was conducted from the 10th to the 17th of this month, targeting 2,500 urban households nationwide. A total of 2,376 households responded.

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