With political uncertainty increasing due to martial law and volatility in financial markets expanding, consumer sentiment has worsened the most since the COVID-19 pandemic.
According to the 'Consumer Sentiment Survey Results' announced by the Bank of Korea on the 24th, the Consumer Confidence Sentiment Index (CCSI) in December was recorded at 88.4, down 12.3 points from November. This is the lowest since November 2022 (86.6) in 2 years and 1 month. The decline is the largest since March 2020 during the pandemic (-18.3p).
The CCSI is an indicator calculated using six indices among the 15 indices that make up the Consumer Sentiment Index (CSI), which are current living conditions, living conditions outlook, household income outlook, consumption expenditure outlook, current economic judgment, and future economic outlook. Based on the 20-year long-term average from 2003 to 2023, a value above 100 indicates more optimism than the long-term average, while below indicates pessimism.
Compared to November, among the six indices that make up the CCSI, the current economic judgment (52, -18p) showed a noticeable worsening. The drop is the largest since March 2020 (-28p). The future economic outlook (56, -18p) also showed the largest decline since July 2022 (-19p), with current living conditions (87, -4p), living conditions outlook (86, -8p), household income outlook (94, -6p), and consumption expenditure outlook (102, -7p) all declining together.
Hwang Hee-jin, head of the Bank of Korea's statistics survey team, noted, 'The consumer sentiment index in November declined due to concerns over slowing exports following the U.S. presidential election results, and the martial law situation at the beginning of this month was an additional factor in the index's decline.' Hwang added, 'The speed of consumer sentiment recovery will be determined by how quickly political uncertainty is resolved.'
The housing price outlook index in December was 103, a 6-point decline from November (109). This index, which reached 119 last September and recorded the highest level since October 2021 (125), has decreased for three consecutive months. This is due to the slowdown in the rise of apartment sales prices and the decrease in apartment sales transactions in Seoul.
The interest rate level outlook index rose 5 points from the previous month to 98. Although the Bank of Korea lowered the base rate consecutively in October and November, the strengthening of household loan management by financial authorities led to an increase in bank loan rates, resulting in more households expecting interest rate hikes.
The expected inflation rate, reflecting the general public's price outlook for the next year, rose 0.1 percentage points from a month ago to 2.9%. The expected inflation rate for three years later increased by 0.1 percentage points to 2.7% from the previous month, while the expected inflation rate for five years later remained the same at 2.6%.