Consumer Sentiment Index Forgetting COVID, Highest in 3 Years... Housing Price Outlook Rebounds

Bank of Korea 'May Consumer Sentiment Survey Results'

Economic Improvement Expected... Interest Rates Forecasted to "Rise Further"

Amid Inflation Concerns, Expected Inflation Rate Jumps to 2.2%

[Asia Economy Reporter Kim Eunbyeol] Consumer sentiment in May rose to its highest level in nearly three years. The surprise 1.6% growth in the first quarter's Gross Domestic Product (GDP) compared to the previous quarter, along with strong exports and improved employment indicators, boosted consumer sentiment. The ongoing COVID-19 vaccination campaign also contributed to the improvement in consumer sentiment.

According to the 'May Consumer Sentiment Survey Results' released by the Bank of Korea on the 25th, the Consumer Confidence Index (CCSI) in May rose 3.0 points from the previous month to 105.2. Since the spread of COVID-19 began, the CCSI has jumped to its highest level, marking the highest index since June 2018 (106.3), about three years ago.

The CCSI is a sentiment indicator calculated using six major indices from the Consumer Sentiment Index (CSI), with the long-term average (January 2003 to December 2020) set as the baseline value of 100. A value above 100 indicates optimism compared to the long-term average, while below 100 indicates pessimism. As the resurgence of COVID-19 continued last winter, the CCSI had been declining but has been on an upward trend for five consecutive months since January this year. The CCSI had already surpassed 100 since March, maintaining an 'optimistic' trend.

All major CSIs that make up the CCSI rose simultaneously. The Current Living Conditions CSI increased by 1 point from the previous month to 93, and the Living Conditions Outlook CSI also rose by 1 point to 97. The Household Income Outlook CSI (98) and Consumption Expenditure Outlook CSI (108) increased by 1 point and 2 points, respectively.

The Current Economic Situation CSI (85) and Future Economic Outlook CSI (99), which reflect perceptions of the economic situation, rose sharply by 8 points and 5 points, respectively.

As the economic situation showed signs of improvement, more consumers expected interest rates to rise over the next six months. The Interest Rate Level Outlook CSI, which indicates expectations for interest rates six months from now compared to the current level, rose 6 points from the previous month to 118. This increase likely reflects recent rapid inflation and banks raising their lending margins, leading more people to anticipate further interest rate hikes.

The Housing Price Outlook CSI (124), which had been declining for four consecutive months since February this year, rose by 2 points as the nationwide apartment sale prices continued to increase.

Meanwhile, perceptions of the consumer price inflation rate over the past year and expected inflation over the next year both stood at 2.2%, each rising by 0.1 percentage points from the previous month. The perception of inflation is at its highest since July 2019, and the expected inflation rate is at its highest since May 2019. The major items expected to influence consumer price increases over the next year were agricultural, livestock, and fishery products (52.0%), petroleum products (35.9%), and rent (33.5%), in that order.

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