As the domestic stock market plummets and geopolitical tensions in the Middle East persist, consumer sentiment has declined for the first time in a month. Despite strong semiconductor exports, concerns about the economy and employment have increased.
The Bank of Korea reported on October 27 that the consumer sentiment index (CCSI) for October stands at 105.4, a decrease of 1.2 points from the previous month. This marks a reversal after a 2.1-point increase in September.
The consumer sentiment index reflects consumers' perceptions of the economic situation. A score above the long-term average of 100 indicates a more optimistic outlook than historical norms. Although the index has fallen this month, it remains above the long-term average.
Among the six components of the consumer sentiment index, five saw declines, with the current economic situation index dropping to 82, down 1 point, and the future economic outlook index falling to 88, down 2 points. The household income outlook index (101), consumption expenditure outlook index (109), and living conditions outlook index (97) also each decreased by 1 point.
While semiconductor exports continue to show strong growth, analysts attribute the decline in consumer sentiment to stock market adjustments, uncertainties in the Middle East, and rising interest rates.
Park Yong-min, head of the Economic Psychology Survey Team at the Bank of Korea, stated, "High growth rates and strong exports have been positive factors for consumer sentiment, but the decline in stock prices, ongoing conflicts in the Middle East, and rising interest rates have contributed to the drop in the index. However, the decrease is not significant."
Expectations for the job market have also worsened. The employment opportunity outlook index fell to 86, down 2 points from the previous month, reflecting concerns about potential slowdowns in the semiconductor industry and the impact of advancements in artificial intelligence (AI) technology on employment. The wage level outlook index also decreased from 124 to 122.
Park noted, "Concerns about a slowdown in the semiconductor industry and the effects of AI technology on employment have influenced these outlooks. If economic conditions worsen, it could impact both employment and wages, suggesting similar factors are at play."
Expectations for rising housing prices have slightly diminished. The housing price outlook index for one year ahead is at 124, down 1 point from the previous month. After reaching 127 in July, the index held steady at 125 in August and September before falling again this month.
Regionally, the decline was more pronounced in Seoul, where the housing price outlook index dropped from 133 in September to 130 in October. During the same period, the six major metropolitan cities fell from 121 to 120, while other regions decreased from 124 to 123.
Nevertheless, the national housing price outlook index remains significantly above the long-term average of 107, indicating that expectations for rising housing prices are still relatively high. The ongoing price increases in apartments in the non-Gangnam area of Seoul and Gyeonggi Province are seen as upward factors, while government real estate measures and interest rate hikes have tempered some of the optimism.
Park commented, "The rising prices of apartments in mid- to low-priced areas of Seoul and Gyeonggi Province are upward factors, while government real estate policies and interest rate hikes act as downward factors. Although the housing price outlook index has slightly declined, it remains at a high level."
The expected inflation rate for consumer prices over the next year is 2.7%, unchanged from the previous month, maintaining the same level for four consecutive months since July. Expectations for inflation three and five years ahead also remain steady at 2.6%.
* This article has been translated by AI.
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