Direct Relationship Between Income Level and Consumer Sentiment

Relatively high-income households are reported to believe the economy is turning around, while those in low-income brackets are reportedly feeling the economic situation is worsening. It shows that consumer sentiment of people in the high-income brackets has recovered, whereas that of relatively low-income households remains pessimistic.

The National Statistical Office (NSO) reported on Tuesday that its consumer expectation index, a barometer of consumer perception about the economic situation, living conditions, and consumption expenditures six months down the road, varied according to incomes.

Households with monthly incomes of more than 4 million won a month posted an index of 106.1, up 4 points from 102.1 in December last year, showing the recovery of consumer sentiment for four straight months. However, households with less than 1 million won in monthly income showed an expectation index of 88.1, down from 89.7 in December last year.

An index reading above the benchmark of 100 indicates that those who believe in the improvement of economic and living conditions in six months outnumber those who have pessimistic views.

The income bracket of 3-4 million won a month marked an index of 103.7, keeping the figure above the benchmark for four consecutive months since last October when the index hit 101.2

Households in income brackets of more than 2 million won and less than 3 million won a month showed an index of 99.7, and those of 1-2 million won a month showed an index of 95.8, up from 2.8 points and 1.6 points from last month, respectively. However, they still remain below the benchmark 100.

“In general, consumer confidence has gradually improved, but it is too early to conclude that the latest index shows the recovery in consumer sentiment,” the NSO said. “Compared to the consumer sentiment of relatively high income households, the recovery of sentiment among low income people has been delayed.”

In the meanwhile, the composite consumer expectation index involving the whole population rose two points from December to 98.0 last month.

The index has improved for four months in a row little by little, encouraging people to have optimistic expectations for the future. The expectation index has remained in the nineties for 16 months since October 2002, when it was 97.1.

Chi-Young Shin higgledy@donga.com