As the stock market adjusts and prices rise, consumer sentiment has taken a downturn.
According to a consumer trend survey released by the Bank of Korea on August 25, the Consumer Confidence Index (CCSI) for August stands at 104.5, a decrease of 2.3 points from the previous month.
The CCSI had dropped significantly in April due to the impact of the Middle East conflict, falling by 7.8 points to 99.2. However, it showed improvement for three consecutive months in May, June, and July. Despite positive trends in the real economy this month, the decline in consumer sentiment marks the first drop in four months, attributed to stock market adjustments and accumulated price increases.
Park Yong-min, head of the Bank of Korea's Economic Sentiment Survey Team, explained, "Although consumer prices fell to the 2% range in July, living costs have consistently risen above 3%, leading to a cumulative effect that has contributed to the decline in consumer sentiment."
The CCSI is calculated using six indices: current living conditions, future living conditions, household income expectations, consumption expenditure expectations, current economic conditions, and future economic conditions. A score above 100 indicates optimistic consumer sentiment compared to the long-term average (2003-2025), while a score below 100 indicates pessimism.
Among the indices that make up the CCSI, the current economic conditions index dropped by 5 points to 79, reflecting increased pessimism due to stock market volatility. The current living conditions index also fell by 1 point to 92, influenced by stock price declines.
The employment opportunity outlook index decreased by 3 points to 86, as the number of jobs in manufacturing and construction continues to decline, and youth employment remains weak, particularly in sectors heavily exposed to artificial intelligence (AI).
After a significant upward trend since April, the housing price outlook index fell by 2 points to 125 in August, following announcements of tax reforms and housing supply measures.
The housing price outlook index rose from 121 in December last year to 124 in January this year, then dropped to 96 in March. However, it rebounded to 104 in April, 112 in May, 120 in June, and reached 127 in July.
The expected inflation rate for the next year remains unchanged at 2.7%, reflecting ongoing inflationary pressures due to the protracted Middle East conflict, anticipated interest rate hikes, and a declining won-dollar exchange rate.
* This article has been translated by AI.
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