South Korea’s consumer confidence climbed to the highest level in almost seven years in August as government spending and record-low interest rates helped drive the nation’s economic recovery, the central bank said Wednesday.
The sentiment index rose to 114 from 109 in July, the Bank of Korea (BOK) said in Seoul today. The figure is the highest since the third quarter of 2002, when the bank began publishing its confidence survey on a quarterly basis.
The index was compiled on a quarterly basis until the second quarter of 2008. A reading above 100 indicates that a majority of consumers expect better economic conditions in the coming months.
A sub-index measuring current economic conditions reached 112 in August, up 16 from the previous month and the index calculating their economic outlook climbed 11 to 125.
Consumers also expected overall interest rates to rise, mirroring an economic recovery. An index measuring interest rate outlooks gained 10 points to 126, it added.
South Korea’s economy expanded 2.3 percent in the second quarter, the fastest pace in almost six years as exports and household spending increased.
Asia’s fourth-largest economy averted a technical recession in the first quarter by growing 0.1 percent on-quarter after tumbling 5.1 percent in the final quarter of 2008.
On August 11, the BOK froze the key interest rate at a record-low of 2 percent for the sixth straight month. BOK Governor Lee Seong-tae has cast a more upbeat view on the economy, suggesting that the bank is mulling a possible rate hike.
In an effort to cushion the economy from the global recession, the government allocated extra funds and also frontloaded spending this year.
The central bank pared the benchmark interest rate by 3.25 percentage points between October and February, the most aggressive easing in a decade. The Kospi stock index has surged 42 percent this year.
Sales at the nation’s major department stores rose for a fifth month while factory production rose at the fastest pace in four months in June.
The consumer confidence index was based on a survey of 2,200 households in 56 major cities, conducted by mail and telephone between August 12 and 19.
Edited by Jung, Eunsun
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