Slowing Consumer Sentiment Index Recovery... Concerns Over Friction in Policy Implementation Process

Consumption indicators are recovering... but the consumer market remains hard to optimistic

With the phased daily recovery (With Corona) measures expected to boost consumer sentiment, the department store industry began its final regular sale of the year on the 19th. On this day, a notice announcing the regular sale was posted at the Lotte Department Store main branch in Jung-gu, Seoul. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Gong Byung-sun] Although With Corona (gradual return to daily life) is being implemented, consumer expectations are faltering. There are also concerns that conflicts may arise when the government implements policies in the future.

According to IBK Investment & Securities on the 21st, the US retail sales index for October rose 1.7% month-on-month, exceeding the market expectation of 1.2%. This marks the third consecutive month of improvement. It is interpreted that retailers quickly entered the year-end event season, leading to consumption of Thanksgiving or Christmas-related products such as electronics and computers.

On the other hand, it is difficult to be optimistic about the future consumption economy. Unlike the October retail index, the recently released University of Michigan Consumer Sentiment Index for November fell to 66.8 from 71.7 in the previous month. It also fell short of the market expectation of 72.1. Jeong Yong-taek, a researcher at IBK Investment & Securities, explained, “The good consumption in October was due to advanced year-end demand,” adding, “This means that the future consumption improvement trend is not as large as the October index shows.”

In Korea as well, there is a possibility that the consumer sentiment index for November will falter. Although the composite consumer sentiment index is rising rapidly, an element water (yo-so-su) shortage crisis occurred from the second week of this month. The trend is better than the US consumer sentiment index, but it is still necessary to observe the trend.

The sluggishness of the US consumer sentiment index is presumed to be due to the issue of consumption capacity. As the US normalizes fiscal policy, various temporary support funds for COVID-19 response are ending. Because of this, previous income, which accounted for a large portion of the increase in household disposable income this year, sharply declined in September, and overall disposable income is on a decreasing trend.

Researcher Jeong explained, “The increase in wage income is due to a labor supply shortage caused by workers who received subsidies not participating in the labor market,” adding, “If workers return to the labor market, it is highly likely to decline.”

In Korea’s consumer sentiment index, the household income sector is also a weak link. Although the household income outlook has recovered to the baseline level of 100, the recovery is slower compared to the consumption expenditure outlook. The employment opportunity outlook still falls below 100, and specific expenditure items remain below 100 except for education expenses.

Researcher Jeong said, “A point to note in the recent US consumer sentiment index is that disappointment with government policies is growing,” adding, “Conflicts may arise during future conflict resolution or policy implementation processes.”

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