South Korea Consumer Confidence Index
(Bank of Korea)

South Korea consumer confidence ebbs in December


The consumer sentiment index in South Korea slipped to 103.9 in December from a 5-month high of 107.9 a month earlier, the Bank of Korea said on Tuesday (Dec. 28).

The reading above 100 means there are still more people optimistic about the economy than pessimistic, whereas the reading below 100 means the opposite.

Households were less optimistic about the current state of the domestic economy (-2 points to 79), while the index measuring their future spending shed 3 points to 110.

Also, the future domestic economic conditions index was one point lower at 96 as well as consumer sentiment regarding current living standards at 91. Still, the households were more pessimistic about future living standards (-1 point to 96).

Outlook on higher interest rates was down 1 point to 137, but remains high compared to 110 and 120 levels earlier in the year to underscore jitters about inflation and rate increases.

The index measuring expectations for inflation retreated 1 point to 151. Expected inflation rate for 2022 inched down 0.1 point to 2.6%, while consumers’ perceived inflation over the past year remained unchanged at 2.7%.

South Korea
(Source: Bank of Korea)

South Korea’s headline inflation accelerated to a decade high last month at 3.7%, remaining above the central bank’s 2% annual target for an eight consecutive month. The latest inflation rate followed a 3.2% increase in October and came in higher than consensus forecast for a 3.1% rise. Higher prices were driven by rising costs from crude oil and other commodities, prompting the Bank of Korea (BOK) to tighten policy ahead of major peers.

The BOK in August became the first major Asian central bank to start raising borrowing costs since Covid-19 struck.

The central bank is expected to continue its policy tightening cycle with rates tipped to reach 1.50% by the end of 2022. Analysts now expect the next rate hike could come as soon as January, ahead of South Korea’s March presidential election.

The central bank still sees the economy growing 4% this year and 3% in 2022.
The Asian country’s economy grew 4% year-on-year in the third quarter of 2021, slowing from a decade-high 6% growth in the preceding quarter and lower than consensus forecast of a 4.2% rise. The latest data was consistent with figures given in the advance estimate. Net trade contributed significantly to growth with exports (7.2% vs 22.4% in Q2) rising faster than imports (6.6% vs 13.7%).

Total exports in November surged by 32.1% year-on-year, standing at $60.44 billion, the largest monthly figure on record, trade ministry data showed. Semiconductors, petrochemicals and vessels soared 40.1%, 63.0% and 237.6%, respectively.

Exports to all major trading partners grew, with those to China, the United States and the European Union rising 27.1%, 22.0% and 18.9% respectively.