The consumer sentiment index fell by the most since December 2024, when martial law broke out. The decline reflected growing concerns about an economic slowdown and rising prices after U.S. and Israeli airstrikes on Iran.
According to the Consumer Survey released by the Bank of Korea on the 25th, the composite consumer sentiment index (CCSI) was 107 in March, down 5.1 points from the previous month. The drop was the largest since December 2024 (12.7 points), right after martial law. The index had risen for two straight months from January this year (+1 point, 110.8) on strong semiconductor exports, but turned downward after three months.
The CCSI is an index compiled from six items: current living conditions, outlook for living conditions, outlook for household income, outlook for consumption expenditure, assessment of current economic conditions, and outlook for future economic conditions. A reading above 100 means consumer sentiment is optimistic compared with the long-term average (2003–2024), while below 100 means it is pessimistic.
The decline in economy-related indexes was pronounced. The outlook for future economic conditions fell 13 points, from 102 in February to 89 in March, and the assessment of current economic conditions fell 9 points, from 95 to 86. The outlook for future economic conditions is the lowest since April last year (73), and the assessment of current economic conditions is the lowest since July last year (86).
Perceptions of household financial conditions also worsened. The index for the outlook for living conditions fell 4 points, from 101 to 97, and the current living conditions index edged down 2 points, from 96 to 94. The outlook for household income also declined, from 103 to 101. Only the outlook for consumption expenditure held steady from the previous month at 111.
By contrast, inflation expectations strengthened as international oil prices rose. The index for the expected price level rose 2 points, from 147 to 149. It is the highest since April last year (149). As prices rose, expectations for interest rate hikes also grew. The expected interest rate level rose 4 points, from 105 to 109.
Fewer consumers expected home prices to rise. Because higher interest rates increase interest burdens on loans, buying sentiment for dwellings was seen as likely to weaken. The housing price outlook index fell 12 points, from 108 to 96. This index reflects expectations for the level of home prices one year ahead. A reading above 100 indicates an expected rise, and below 100 indicates an expected fall.
Expected inflation one year ahead was 2.7%, up 0.1 percentage point from a month earlier. Expected inflation three years ahead rose from 2.5% to 2.6%, while expected inflation five years ahead held at 2.5%.