Korea: Consumer confidence improves in September
September 26, 2019
The Bank of Korea’s composite consumer sentiment index recovered to 96.9 in September from 92.5 in August, likely due to a sharp fall in the seasonally-adjusted unemployment rate in August—the lowest since November 2013. Nevertheless, the index remained below the 100-point threshold that separates pessimism from optimism among households, as yet another escalation of the U.S.-China trade war drags on global trade prospects and Korea’s own rift with Japan weighs on the domestic economic outlook.
The increase in consumer confidence in September was largely driven by households’ rosier outlook on both current and future domestic economic conditions, while households’ views on future employment opportunities also improved in September—likely in part due to ongoing government spending measures to boost the economy this year and in 2020. Moreover, households were more upbeat regarding their current and future living standards and ability to save in September.
Going forward, both monetary and fiscal stimulus should support consumer confidence for the remainder of this year and into 2020. Moreover, a tight labor market and an ultra-low inflation environment should help prop up private spending. That being said, a subdued global growth outlook, flagging foreign demand for Korean goods and ongoing political rifts with Japan will continue to weigh on households’ current and prospective confidence in the domestic economy.
Author: Steven Burke, Economist