Consumer Sentiment Records 30 Month Low

Inconsistent government policies and a series of labor strikes have aggravated the local economy, causing consumers to become ever more pessimistic about the nation`s economic prospects.

Negative economic prospects by consumers, in turn, have led to shrinking investor confidence, speeding up the economic recession in the country.

Consumer sentiment, in particular, has recorded a 30 month low, which increases concerns for adverse effects across the nation.

According to a survey entitled “Consumer Sentiment for 2Q”, which was conducted for 2,500 households in 30 cities in the nation by the Bank of Korea (BOK), the Consumer Sentiment Index (CSI) for six months to come stood at 68, 22 points down from the previous quarter and recorded the lowest levels since the first quarter in 2001 registered at 66.

A CSI over 100 means that more customers will have rosy prospects in the near future in terms of economic conditions while a CSI below 100 means otherwise.

The CSI for the current economy stood at 45, the lowest since the third quarter in 1998 recorded 27 in the wake of the financial crisis. The recent figure shows the seriousness of consumer sentiment on the economy.

The CSI, which compares people‘s living conditions with six months before, was 71, the lowest since the fourth quarter in 2000 when it stood at 57, while the CSI for job market prospects went down from 86 in the first quarter to 64, another record low since the first quarter of 2001 at 57. This demonstrates that the majority of people see future prospects on living conditions and employment will worsen.

The CSI for household income prospects somewhat improved from 88 in the first quarter to 91, but was still below the 100 mark, while CSI for consumption plan in six months was 102, similar to 103 a quarter earlier.

By items for customers‘ future plans to spend money, expenses for education (111) and for medical and welfare (113) topped their wish list. On the other hand, a number of customers said they planed to cut expenses for eating out (89), travel (94), and leisure, entertainment, and recreation (94).

“Inconsistent government policies and labor disputes are scaring off foreign investors and customers don’t trust the government,” said Bak Jae-ha, a researcher at Korea Institute of Finance. “If the government cannot read current problems and present its long-term vision, Korea‘s economy will be put at serious risk.”

Kwu-Jin Lim mhjh22@donga.com