SEOUL, May 22 (AJP) -South Korea’s consumer sentiment rebounded sharply in May, returning to optimistic territory after briefly slipping below the long-term average a month earlier, as robust exports and a record-setting stock rally outweighed concerns over prolonged Middle East tensions and rising energy prices, central bank data showed Friday.
Sentiment about current economic conditions and future prospects improved even as inflation expectations hovered near 3 percent, reinforcing the case for maintaining a monetary tightening bias to contain inflationary pressures from imports and wage increases.
The Bank of Korea said the Composite Consumer Sentiment Index (CCSI) rose to 106.1 in May from 99.2 in April, marking the strongest monthly increase since the post-pandemic rebound period and pushing sentiment back above the long-term average benchmark of 100. The recovery was broad-based across nearly all major categories.
Consumers’ assessment of current economic conditions jumped 15 points — the strongest gain since October 2020 — to 83, while expectations for future conditions also surged 14 points to 93. Expectations for living standards climbed five points to 97, while household income expectations rose two points to 100.
Consumer spending outlook also improved two points to 110, supported by strong stock-market returns and generous bonus payouts from high-performing technology companies.
Housing sentiment strengthened notably as expectations for home prices surged eight points to 112, reversing part of the weakness seen earlier this year. Wage outlook sentiment also edged up two points to 122.
Expectations for interest rates eased slightly, with the interest-rate outlook index slipping one point to 114, though it remained historically elevated.
Consumers also appeared somewhat more optimistic about employment conditions. The employment outlook index rose six points to 88 after falling sharply in April, reflecting hopes that the export-driven recovery would generate broader spillover effects across the economy despite ongoing conflicts in the Middle East.
Inflation concerns, however, remained elevated. Consumers’ perceived inflation rate over the past year rose to 3.0 percent in May from 2.9 percent in April, while one-year-ahead inflation expectations eased only slightly to 2.8 percent after hitting 2.9 percent the previous month.
Longer-term inflation expectations for three and five years ahead remained anchored at 2.6 percent.
The survey showed petroleum products remained the dominant driver of inflation concerns, with 85.2 percent of respondents citing oil-related products as a key factor behind expected price increases over the next year. Public utility charges and industrial goods followed.
The inflation outlook follows Thursday’s producer price data, which pointed to mounting upstream cost pressures across the economy.
The Bank of Korea said the producer price index rose 2.5 percent in April from the previous month and 6.9 percent from a year earlier, led by a surge in petroleum and chemical products. Prices of coal and petroleum products jumped 31.9 percent on-month, while overall energy prices rose 7.9 percent.
The broader domestic supply price index, which measures prices of goods and services supplied to the domestic market, climbed 5.2 percent on month in April, while the total output price index surged 3.9 percent.
The debt market has increasingly priced in a higher-for-longer rate environment as inflationary pressure persists alongside a stubbornly weak currency.
The five-year government bond yield has neared 4 percent and the 20-year paper topped 4.2 percent, while even the one-year note traded at 3.165 percent, sharply above the benchmark policy rate of 2.5 percent.
The Bank of Korea is scheduled to hold its rate-setting meeting next Thursday.
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