Consumer Confidence Hits Record Low

The nation`s consumer confidence numbers have hit a record low since that of November 1998 when the National Statistics Office (NSO) conducted its survey. Future outlooks have also become more negative.

If this is true, it would not be an exaggeration for companies and consumers to say that the economy is worse than in 1997.

According to the NSO`s consumer evaluation index, which measures local consumers` views on their current economic condition as well as the local economy, the index figure for March dropped to 63.9, down 2.6 from that in February.

A reading below 100 means that more consumers believe economic conditions and the economy weakened as compared with six months ago. On the other hand, a reading above 100 indicates that a majority of consumers see economic conditions positively.

The sub-index for consumers` evaluation of the economy sank to 50.2 in March. Moreover, the sub-index for consumers` current economic condition as compared with six months ago fell to 77.7.

The sub-indexes for asset evaluation as compared with six months ago were 101.5 for housing and shopping areas, 99 for land, forestry and fields, 90.7 for savings, and lastly, 67.4 for stocks and bonds. This indicates that low stock prices and interest rates were disadvantageous to investment on these fronts.

Meanwhile, a separate index measuring future economic conditions as compared with present plunged to 90.4, down 5.7 from February, the lowest level in 26 months since January 2001 (89.7) and below 100 for the sixth consecutive month since last October.

The sub-index for consumer`s outlook on the economy declined to 78.9 last month from 89.1 in February. Other sub-indexes were 96.0 for living conditions, 98.7 for spending, 89.3 for purchasing consumer durables, and 87.1 for cultural spending, suggesting that all the indexes were below the 100 mark.

The indexes in general were all below 100. In particular, those in the income bracket of 3 million won or higher numbered 97.3, while those with incomes below 1 million won numbered 85.6, indicating the latter view the economic outlook more negatively.

The indexes were 88.1 for those in their 50s, 88.8 for those in their 50s, 88.5 for those in their 60s, and 92.9 for those in their 30s. Nevertheless, only those in their 20s predicted that the economy would recover in the near future (101.2).

“A negative economic outlook means that consumers will likely cut spending in the future,” said Kim Ki-seung, a researcher at LG Economic Research Institute. “Domestic consumption is more likely to sink for the time being.”

Kwang-Hyun Kim kkh@donga.com