Roaring stock market lifts Korean consumer confidence despite weak real economy

SEOUL, January 23 (AJP)-South Koreans grew more optimistic about the economy and their spending plans in January, buoyed by a surging stock market despite continued weakness in real economic conditions from a weak won and strong prices.  

According to the Bank of Korea on Friday, the Consumer Sentiment Index rose 1.0 point from the previous month to 110.8 in January, supported by the strongest spending bias in five months. 

A reading above 100 indicates sentiment more optimistic than the long-term average for the 2003–2024 period, while a reading below 100 signals pessimism. 

Among the six sub-indicators, the outlook for the overall economy rose 2 points to 98. Current living conditions edged up 1 point to 96, the outlook for consumer spending increased 1 point to 111 - highest in five months, and the assessment of current economic conditions also rose 1 point to 90. The outlook for living conditions remained unchanged at 100, while expectations for household income held steady at 103. 

Lee Hye-young, head of the BOK’s economic sentiment survey team, attributed the improvement in sentiment largely to the record-setting stock market. 

The benchmark KOSPI has been flirting with the 5,000 mark after an almost uninterrupted rally over the past month. 

“Rising stock prices influenced multiple indicators, including living conditions, household savings and the outlook for consumer spending,” Lee said. She added that higher investment income from stocks and funds appeared to improve perceptions of household finances, while some respondents interpreted the market rally itself as a signal of broader economic improvement. 

Lee noted that the weak won had little impact on sentiment this month, adding that authorities’ efforts to stabilize the dollar toward year-end helped limit concerns. 

The housing price outlook index, which measures expectations for home prices a year ahead, rose 3 points to 124 — the highest level since October 2021 — as apartment sale prices continued to climb nationwide and across the Seoul metropolitan area. The increase suggests expectations for further gains in home prices have strengthened, Lee said. 

Expected inflation for the year ahead remained unchanged at 2.6 percent, while perceived inflation over the past year was steady at 2.9 percent