"Domestic Demand Revives"... Consumer Sentiment Rebounds After Three Months

Bank of Korea's 'October Consumer Sentiment Survey Results'
Domestic Demand Expected to Rise After Three Months
Housing Price Outlook Falls for the First Time in Nine Months

As inflation slows and the base interest rate is lowered, expectations for domestic demand activation have increased, leading to a rebound in the Consumer Sentiment Index after three months. Expectations for housing price increases have stalled for the first time in nine months due to the government's strengthened household loan management. The expected inflation rate, which indicates the forecasted consumer price inflation over the next year, remained unchanged at 2.8% compared to the previous month.

According to the 'October Consumer Sentiment Survey Results' released by the Bank of Korea on the 23rd, the Consumer Sentiment Index (CCSI) for this month rose by 1.7 points from the previous month to 101.7. The Consumer Sentiment Index had declined for two consecutive months in August (100.8) and September (100.0) but rebounded after three months. This was due to growing expectations that domestic demand would be revitalized as inflation slowed and the base interest rate was lowered.

The CCSI is a sentiment indicator calculated using six major indices that make up the Consumer Sentiment Index (CSI). A value above the long-term average (2003?2023) of 100 indicates optimistic consumer sentiment, while a value below 100 indicates pessimism.

The expected inflation rate for the next year remained at 2.8%, unchanged from the previous month. The newly published expected inflation rate for three years ahead was 2.7%, also unchanged from the previous month. The expected inflation rate for five years ahead decreased by 0.1 percentage points to 2.6% compared to the previous month.

Hwang Hee-jin, head of the Statistical Survey Team at the Bank of Korea’s Economic Statistics Bureau, explained, "Recently, prices of tangible agricultural products like cabbage have been high, and concerns remain about increases in public utility fees such as electricity and transportation charges in the second half of the year, which is why expected inflation has remained at the same level as the previous month."

Expectations for Housing Price Increases Stall for the First Time in Nine Months

Apartment prices are fluctuating across Seoul. According to the weekly apartment price trends from the Korea Real Estate Board, Seoul housing prices have risen for 11 consecutive weeks from the fourth week of March until last week. Now, areas like Nowon, Dobong, and Gangbuk, which had lagged behind Gangnam, have also turned to an upward trend. The 84㎡ exclusive area apartment in Gyeonghuigung Xi, considered the "flagship apartment" of northern Seoul, was traded at 2.15 billion KRW on the 30th of last month (based on actual transaction prices from the Ministry of Land, Infrastructure and Transport). This is a 200 million KRW increase compared to January (1.95 billion KRW). The photo shows the apartment sale and jeonse price information board posted near Gyeonghuigung Xi apartments in Jongno-gu, Seoul, on the 12th. Photo by Kang Jin-hyung aymsdream@

Expectations for housing price increases have somewhat stalled. This month’s Housing Price Outlook CSI was 116, down 3 points from the previous month, marking the first decline in nine months since January. This is due to the government’s strengthened household loan management, which has led to a decrease in apartment sales transactions and a slowdown in the rise of sales prices. However, the figure remains higher than the long-term average (107).

Team leader Hwang said, "Housing prices rose in July and August, and household debt increased, prompting the government to announce several countermeasures. Although the overall base interest rate has decreased, market loan interest rates are rising, so we need to monitor the future direction of the housing price outlook."

Expectations that interest rates will continue to fall have increased. This month’s Interest Rate Level Outlook CSI was 88, down 5 points from the previous month, marking the lowest level since July 2020 (88). This reflects growing expectations that market interest rates will decline as both Korea and the United States shift their monetary policy stance and inflation slows.

The major items expected to influence consumer price increases over the next year were agricultural, livestock, and fishery products (61.2%), public utility fees (50.5%), and petroleum products (28.3%), in that order. Compared to the previous month, the response rates for agricultural, livestock, and fishery products (up 7.4 percentage points) and petroleum products (up 6.3 percentage points) increased, while the share for public utility fees decreased by 6.8 percentage points.

This survey was conducted from the 8th to the 16th of this month, targeting 2,500 households in urban areas nationwide, with 2,280 households responding.

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