"Omicron Confirmed Cases Surge"... Consumer Sentiment Index Turns Down After One Month

Bank of Korea, February Consumer Sentiment Survey Results
Consumer Sentiment Index 103.1... Down 1.3 Points
Housing Price Expectation Index Declines for 6 Consecutive Months

[Image source=Yonhap News]

As the Omicron variant of COVID-19 continues to spread extensively, the Consumer Sentiment Index (CCSI) has turned downward again after a month. With interest rate hikes and government regulations on household loans overlapping, the housing price outlook index has fallen below the baseline value of 100 for six consecutive months.

According to the 'February Consumer Survey Results' released by the Bank of Korea on the 22nd, this month's Consumer Sentiment Index (CCSI) recorded 103.1, down 1.3 points from the previous month. The Consumer Sentiment Index fell by 3.8 points in December last year due to an increase in COVID-19 cases, then rose by 0.6 points in January this year on expectations of 'With Corona,' but recently dropped again after a rapid surge in Omicron cases within a month.

The Consumer Sentiment Index is based on a baseline value of 100, where a value above 100 indicates optimism compared to the long-term average, and below 100 indicates pessimism.

Hwang Hee-jin, team leader of the Statistical Survey Team at the Bank of Korea's Economic Statistics Bureau, explained, "Since the spread of Omicron is so rapid, it seems the Consumer Sentiment Index was also affected. Although there is a contraction due to the quarantine situation, the social distancing measures have not been fully strengthened, and the risk of Omicron is perceived as low, so the index did not fall as much as the increase in confirmed cases might suggest."

Among the six components that make up the CCSI, five declined and one remained at the same level. The Current Living Conditions CSI fell by 1 point to 90, while the Living Conditions Outlook CSI remained steady at 96. Household Income Outlook (99), Consumption Expenditure Outlook (110), and Current Economic Conditions Index (75) each dropped by 1 point. The Future Economic Outlook Index fell by 2 points to 91. Among these, Household Income Outlook and Consumption Expenditure Outlook are at historic lows.

In particular, the Housing Price Outlook Index dropped 3 points from the previous month to 97, falling below the baseline value of 100. This marks six consecutive months of decline and the lowest level in 1 year and 9 months since May 2020 (96). This is interpreted as a significant weakening of housing demand sentiment due to financial authorities tightening loan regulations and the Bank of Korea raising the base interest rate to 1.25% per annum.

The Interest Rate Level Outlook CSI remained high at 139, unchanged from the previous month, due to rising market interest rates and inflation concerns. The Employment Opportunity Outlook CSI rose by 1 point to 93, reflecting expectations of job recovery.

Perceived inflation and expected inflation rates both rose by 0.1 percentage points from the previous month to 2.8% and 2.7%, respectively. The major items expected to influence consumer price increases over the next year were petroleum products (61.0%), agricultural, livestock, and fishery products (40.6%), and public utility charges (37.5%), in that order.

Team leader Hwang explained the rise in expected inflation rate, saying, "Many respondents cited the rise in petroleum product prices due to the increase in international oil prices as a reason. It seems that the rise in perceived prices of food ingredients and the outlook for public utility charge increases also had an impact."

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