South Korea Consumer Sentiment Falls Below 100 as Mideast War, Inflation Fears Grow

Rising geopolitical risk tied to the war in the Middle East, along with inflation worries, pushed consumer sentiment below its long-term average for the first time in a year.

According to the Bank of Korea’s consumer survey released on the 23rd, the April Consumer Composite Sentiment Index, or CCSI, fell 7.8 points from the previous month to 99.2. It was the first reading below the benchmark 100 since April last year.

The CCSI is calculated from six components: current living standards, outlook for living standards, outlook for household income, outlook for consumer spending, assessment of current business conditions and outlook for business conditions. A reading above 100 indicates sentiment is more optimistic than the long-term average for 2003–2024; below 100 indicates pessimism.

All six components declined. The index for assessment of current business conditions fell 18 points to 68, reflecting factors including disruptions to energy supplies. The outlook for business conditions dropped 10 points to 79 on concerns about rising prices and a slowing economy.

The outlook for living standards fell 5 points to 92. Current living standards slipped 3 points to 91, the outlook for household income fell 3 points to 98, and the outlook for consumer spending dropped 3 points to 108.

“Exports are showing a solid trend, but higher energy prices and supply disruptions stemming from the war in the Middle East, along with broader domestic and external uncertainty, affected consumer sentiment,” said Lee Heung-hoo, head of the Bank of Korea’s economic sentiment survey team.

Separately, the outlook for interest rates rose 6 points to 115, reflecting higher market and lending rates and inflation concerns. The housing price outlook, which measures expectations that home prices will rise over the next year, climbed 8 points to 104. The bank cited continued gains in Seoul apartment sale prices, led by outlying areas, and worries that the Middle East war could push up construction costs and presale prices.

Expected inflation for the next year rose 0.2 percentage points from the previous month to 2.9%, influenced by concerns about price increases tied to supply disruptions in raw materials such as crude oil. Perceived consumer inflation over the past year was unchanged at 2.9%.