South Korea’s consumer sentiment deteriorated in February as households’ expectations on the future living standards and earnings weakened, survey data showed Tuesday, as the Bank of Korea prepares to hold its latest rate-setting session later this week.
The consumer confidence index dropped to 90.2 from 90.7 in January, survey results from the Bank of Korea showed. In December, the reading was 90.2.
The sub-index for households’ assessment of the prospective living standards dropped to 83 from 85, and the measure for the view on prospective income eased to 95 from 96.
Consumers expect their household expenditure to rise in the future and the relevant index climbed further to 112 from 110.
Households’ expectations for the domestic economic conditions in future were unchanged and the corresponding index was steady at 60.
Read more: South Korea GDP Sinks 0.4% In Q4
Meanwhile, South Koreans were less pessimistic about their job prospects and the relevant index climbed to 69 from 66.
Their interest rate expectations eased and the measure dropped sharply to 113 from 132.
The assessment on the saving prospects was stable and the reading was steady at 91 for the third month in a row.
Household debt expectations eased slightly, while they continue to expect future inflation to be strong. Housing prices are also expected to rise, while expectations for wage growth were stagnant.
The expected inflation rate for the upcoming year was 4.0 percent, the survey said.
The consumer confidence survey was conducted between February 7 and 14, among 2,500 households.
Elsewhere on Tuesday, Bank of Korea Governor Rhee Chang-yong stressed the need for a more delicate policy response amid high economic uncertainty, both externally and on the domestic front, Reuters reported.
According to Rhee, China re-opening and the war in Ukraine have marred the projection for future inflation path.
At its upcoming rate-setting session on February 22, the Bank of Korea is widely expected to leave its key interest rate unchanged at 3.50 percent after hiking it by 25 basis points in January.
The central bank is expected to start cutting rates before the end of this year as the economy slows.
“The near-term economic outlook for Korea is very poor, with falling real incomes, problems in the housing market, and weak global demand all set to weigh on prospects this year,” Capital Economics economist Gareth Leather said.
“Our forecast is that the economy will grow by a below-consensus and below-trend 0.5 percent in 2023.”
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