More Contraction for Next Year Comsumption

A consumer`s sensible business decreased to the lowest value throughout the year and the leading composite index was turned to a decreasing tendency. It is forecasted that a domestic business will be largely contracted during a half of the next year.

According to `results of the consumer tendency investigation of the fourth quarter` published by the bank of Korea (BOK) on December 30, as many consumers are negative on the business of the first half of next year, major indices such as CSI declined below 100 of a basic value.

The index large than 100 means that many consumers consider the good future business situation, but the index less than 100 means that many consumers expect the worse future business situation.

The business prospect CSI was 95 in the fourth quarter and showed the lowest value throughout the year. It dropped below 100 for the first time. CSI of living condition prospects and CSI of the household income prospects was 90 and 97 below 100 of the basic value respectively. It means that the consumers` household income will decline and the living conditions will be difficult for the next year.

CSI of the consumption expenditure plan was 106 exceeding the basic value. However, it was the lowest value after the last third quarter (107) and largely decreased over 116 of the previous quarter.

CSI of an employment situation prospect declined to 96 decreased over 114 of last quarter by reflecting an uncertainty increase on the business recovery.

Indicating the current sensible business compared with one prior to six months, CSI of the current living situation was 91, and CSI of the current business determination was 97. They showed that the consumers` sensible business was frozen from the second half of the year.

Jo Gang-Rae, vice-chief of the tendency analysis team, BOK explained, “The business tendency of the consumer trend investigation was fitted perfectly as it was. For the first half of next year, the economic depression based on a private consumption contraction is anticipated.”

Besides, according to `the industrial prospect of the first quarter of 2003` published by Federation of Korean Industries, the business of ten industries such as a motorcar, petrochemicals, textile and chemical fiber is estimated at the level of the first quarter.

The investigation said that such as a machine tool and construction, four industries have been worse, but six industries including a shipping, electronics and semiconductor seemed to take a favorable turn.

In terms of the domestic demand, it was estimated that seven industries out of 17 industries showed the decreasing tendency owing to the domestic and foreign economic unrest and consumption psychology contraction. The analysis said that the exports would show the increasing tendency owing to the favorable tone of China market, recovery of IT demand and a strengthening of the foreign marketing.

According to `industrial activities tendency of November` published by Korea National Statistical Office (NSO), the leading composite index was turned to a minus again after three months. Accordingly, it indicated that the business uncertainty has been higher. The leading indicator decreased by 0.3% points over October and showed the decreasing tendency after three month from September.

Owing to the favorable tendency of the semiconductor, the production and exports increased by 7.1% and 6.3% respectively over the same month of last year. Being the consumption index, a wholesale and retaining increased by 4.8% over the same month of last year.

Kwu-Jin Lim Kwang-Hyun Kim mhjh22@donga.com kkh@donga.com