Consumer sentiments deteriorate to worst-ever level

Consumer sentiments have reverted to the IMF levels of the second half of 1998. According to the results of a survey released Monday by the Bank of Korea covering 2,314 households in 16 cities on changing consumer sentiments during the third quarter of the year (Jul.-Sept.), the consumer survey index (CSI) that compares current economic prospects to those of six months ago dropped from 95 in the previous quarter to 70. The CSI registered 58 during the fourth quarter of 1988 and stayed in the 90 levels until it dropped to 70, the lowest figure in 1.9 years. The growth rate of the GDP is also on a downward slope after registering 13.0% during the fourth quarter of last year. It dropped to 12.8% in the first quarter and 9.6% in the second quarter of this year.

A researcher from the Samsung Economic Research Institute asserted that the worsening consumer sentiment would negatively impact internal demand, leading to an overall shrinkage of the object economy.

The CSI index that measures future economic prospects compared to six months ago dropped from 101 in the second quarter of this year to 70, the lowest figure since 80 was registered in the fourth quarter of 1988.

Moreover, the CSI index that measures if present standards of living are better than those of six months ago dropped from 90 to 81.

The Bank of Korea pointed to the surge in oil prices, plummeting semiconductor prices and the withdrawal of Ford from the bidding for the acquisition of Daewoo Motor in September as the main factors behind the negative consumer sentiment.

Prior to the announcement of the survey results by the BOK, the National Statistical Office released its survey results on consumer prospects for August, which indicated that the Average Consumer Evaluation Index in comparison to the past six months dropped four months in a row to 96.4. If the Average Consumer Evaluation Index is less than 100, it indicates that consumption has dropped in most households.

The Korea Chamber of Commerce and Industry's forecast for the Business Survey Index of manufacturing companies during the third quarter stood at 116, 22 points lower than the 138 registered during the second quarter.