South Korea’s Consumer Sentiment Hits Lowest Mark Since May Amid Economic Slowdown

SEOUL, - Consumer sentiment in South Korea has declined for the third consecutive month in October, influenced by concerns over economic deceleration, falling exports, and reduced spending capability, according to a survey from the Bank of Korea (BOK).

According to a news release by Yonhap News Agency, the composite consumer sentiment index fell to 98.1 in October from 99.7 in September. This marks the lowest level since May, when the index was at 98. A reading below 100 indicates that pessimists outnumber optimists.

The central bank attributes the decline in consumer sentiment to prolonged monetary tightening and a rise in inflation. Inflation expectations were flat in October, although the survey indicated a downward trend in consumer prices.

For the year ahead, consumers anticipate a 3.4% increase in consumer prices, up from 3.3% the previous month. This is the first upward adjustment in eight months, attributed to escalating geopolitical risks and a surge in public service fees. Such shifts are carefully observed as they could lead businesses to adjust prices and workers to seek higher wages, adding further upward pressure on inflation.

Last month, consumer prices surged by 3.7% compared to a year ago, the fastest increase in five months. The rise is attributed to escalating oil prices and elevated costs of certain agricultural products.

The Bank of Korea expects inflation to exceed 3% towards the end of the year, significantly above its target rate of 2%. Earlier this month, the central bank maintained its key interest rate at 3.5% for the sixth consecutive time. This decision was influenced by slowing economic growth and other uncertainties, including the ongoing conflict between Ukraine and Russia, as well as increasing household debts.

The rate retention in October follows a series of rate freezes that began in February, after the Bank of Korea had previously increased the rate seven times consecutively from April 2022 to January 2023.

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