Expectation for Economic Recovery, Sudden Rise in Consumption

As the frozen domestic consumption rapidly rises, recovery of the economy is widely expected. On the other hand, income and savings decreased in more households compared to the past 6 months to 1 year, which would mean that some households would suffer heavy debts.

The National Statistical Office announced on the 15th that consumer’s expectation rate for the next 6 months, which is based on living conditions and consumption expenditure, is marked at 100.9 in December 2001, crossing the 100-line in 6 months. Such result is 4.2 points higher than last November`s (96.7), and is the highest rate in 16 months since August 2000’s 102.2.

Exceeding 100 points in the consumer’s expectation rate suggests that there are more people with positive attitudes about the recovery of the economy than people with negative attitudes. The rate marked its lowest point last September at 92.1 points, and continuously increased, hinting that economic recovery is highly expected.

The consumer evaluation rate, which compares consumers’ current economy and living conditions to 6 months ago, has risen to 89.2 points, 5.6 points higher than last month (83.6).

Consequently, the purchase consumption rate against durable consumer goods such as electronics and automobiles, increased from 91.9 to 93.6 points. Food service, entertainment, and cultural life-related expenditure plan rate also increased from 91.9 to 95.2 points.

However, households with higher incomes than a year ago made up only 15.5 percent, and the ones with lower incomes reached 27.3 percent. Also, households with increased savings halted at 11.4 Per Cent, compared to 17.1 percent of households with increased debts.

More evaluations of the increase of possessed stocks and residence values were put out than 6 months ago. Asset evaluation rate of stocks marked 81.6 points in December, being 5.0 points higher than November, and the residence evaluation rate also increased from 100.5 to 102.1 points.

Chan-Sun Hong hcs@donga.com