Korea: Consumer confidence soars to an over three-year high in May
May 26, 2017
Despite heightened geopolitical tensions in the Korean peninsula, consumer confidence rocketed in May to the highest level since April 2014. According to the Bank of Korea’s Composite Consumer Sentiment Index (CCSI), the indicator jumped from 101.2 in April to 108.0 in May. As a result, confidence now sits further above the 100-threshold that separates optimism from pessimism among consumers, marking the second month in positive territory since a corruption scandal erupted last October.
The boom in confidence is likely owing to the election of President Moon Jae-in, which has significantly reduced domestic political uncertainty and provided a more robust outlook for the economy amid positive expectations that the new government will usher in an era of expansionary fiscal policymaking. Korea’s external sector also continues to show solid performance, which has kept up the economic momentum.
Looking at the details, there were improvements across the board. Perceptions on better employment prospects improved the most from the previous month, while consumer sentiment regarding current and future domestic economic conditions also rose markedly in May. Despite the upbeat sentiment and modest improvement in household income expectations, households showed no indication of greater spending, which held steady from previous month’s result. Consumers’ perceptions of current debt levels remained the same, while their sentiments regarding future household debt levels deteriorated slightly. The high levels of debt in the domestic economy remain a top concern for Korea’s policymakers, especially at a time when the U.S. Federal Reserve is increasing interest rates.
Author: Nihad Ahmed, Economist