Aggravation of Consumer Business Prospect

As a domestic demand has been frozen rapidly, a consumption index published by the government fell down to the lowest points in 13 months. In particular, the low-income group has pessimism for a business and living conditions.

According to ‘the investigation of consumer prospects for November’ published by the Korea National Statistical Office on December 13, the Consumer Expectation Index fell down to 93.4 points for consecutive five days. It is the lowest point after a lapse of 13 months since last October (92.9).

Indicating a current business situation and living conditions compared with six months before, the consumer evaluation index was 80.9 points. It is the lowest point after last October (79.0).

Shin Hu-Sik, economist of Daewoo Securities said, “Owing to a decrease of a real estate’s price and a household loans restraint of the government, the consumption psychology was frozen hard. Because of a lot of factors of anxiety which can hardly be solved for a short-term such as a unclear problem of the North Korea and a risk of Iraq war, the business will be very questioning and ambiguous in the future.

The consumer expectations index of November fell down over October in five sections of △business, △living conditions, △consumption expenditures △consumption of durable goods and △restaurant ·entertainment expenditures.

Particularly, the expectation of the business prospects suddenly dropped to 87.8 points in October over 105.9 points in September. It is the lowest point since last October (81.6). So, the pessimism of the business has been rapidly spread.

The expectation of the living conditions posterior to 6 months was 96.2 points, and so it is forecasted that the living condition will be worse. The purchase of consumer durable goods (92.2) and the restaurant · culture expenditures (90.8) has been also in a descending curve. Only the consumption expenditures (104.2) exceeded 100 because of a narrow decrease limit.

In terms of the income group, the consumer expectations index of the group which has a monthly average income of 1,000,000 won ∼1,490,000 won and the lower income group which has the monthly average income of 1,000,000 won was 91.2 and 88.6 respectively. The lower the income is, the higher a crisis of the business and living conditions is.

Also, the index of the group which has the monthly average income of 2,500,000 won∼2,990,000 won and the group which has one of above 3,000,000 won was 96.1 and 95.7 respectively. They are relatively stable over the low-income group.

Kwang-Hyun Kim Suk-Ho Shin kkh@donga.com kyle@donga.com