Korea: Koreans temper their sentiment as tensions with North Korea mount
August 25, 2017
The consumer confidence index edged down in August, putting an end to six months of consecutive improvements in consumer sentiment. The index fell from an over six-year high of 111.2 points in July to 109.9 points in August. Despite the drop, consumer confidence remains well above the 100-point threshold that separates optimism from pessimism among Korean households.
The decline in consumer sentiment was due to a deterioration in consumers’ views on current living standards and their future outlook. Current domestic economic conditions and households’ prospective domestic economic conditions also saw downturns in August. Conversely, consumers’ projections on household income and spending were unchanged and slightly higher, respectively.
The drop in sentiment partly reflected heightened tensions on the Korean peninsula as North Korea and the United States exchanged bellicose rhetoric following the UN’s tightening of sanctions on North Korea. Although tensions have receded somewhat since, Korea’s northern neighbor is likely to remain a source of concern as it forges ahead with its ballistic missiles program.
Author: David Ampudia, Economist