SEOUL- South Korea’s consumer sentiment weakened in August for the first time in six months, a central bank survey showed on Tuesday, amid worries about sluggish economic growth.
The consumer sentiment index fell to 103.1 from 103.2 the previous month, the Bank of Korea’s monthly survey of consumers showed, in its first decline since February.
Consumers’ assessment of current economic conditions and future economic outlook worsened, dragging the headline index lower and offsetting improvements in the outlook for living conditions and for income.
“Economic cycle-related indexes fell on risks to exports from China and a delayed recovery of the semiconductor industry,” a BOK official said at a media briefing.
Consumers’ inflation expectations for the next 12 months stood at a median of 3.3 percent , unchanged from the month before, the survey also showed.
Meanwhile, BOK will leave its key policy rate unchanged at 3.50 percent for a fifth consecutive meeting on Thursday and hold it steady for the rest of this year as inflation continues to ease and household debt remains high, a Reuters poll found.
With inflation easing to 2.3 percent in July, the lowest in over two years and close to the BOK’s 2.0 percent target, financial markets are also indicating a tightening cycle that took rates up 300 basis points in 17 months is over.
Despite the central bank’s expectation inflation will rise in coming months, slowing economic growth and high household debt will likely deter the BOK from further hikes, instead opting for a hawkish stance to deter markets from pricing in rate cuts.
All 43 economists in the Aug. 14-21 Reuters poll expected no change to the 3.50 percent base rate at the Aug. 24 meeting.
“After the last hike in January, the base rate is expected to remain unchanged at the current level until the end of this year … As the consumer price inflation rate has entered the 2 percent range, the room to respond to inflation is gradually weakening,” said Kong Dong-rak, economist at Daishin Securities.
“However, if concerns about a slowdown in economic indicators grow, expectations for a base rate cut will continue to rise, especially in the financial market. But it will only be possible in 2024.” – Reuters
