The Korea Herald


Consumer sentiment rises for 2nd month in May

By 신용배

Published : May 26, 2011 - 19:07

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Korea’s consumer confidence rose for the second straight month in May, aided by optimism about the economic recovery, the central bank said Thursday.

The consumer sentiment index ― a gauge of consumers’ overall economic outlook, living conditions and future spending ― stood at 104 for May, up from 100 in April, the Bank of Korea said in a monthly report. It marked the highest level since February when it came in at 105.

The sentiment index rose for two months on end in May after falling below the 100-point level for the first time in 23 months in March. The survey, based on a poll of 2,047 households in 56 major cities, was conducted from May 13-20.

A reading above the benchmark 100 means optimists outnumber pessimists. The index is widely used to gauge the future direction of private spending.

“The index returned to the level seen before March when an array of negative news, including a devastating earthquake in Japan and political unrest in northern African countries,” said Jang Wan-sub, an official at the BOK.

Jang said it is too early to say that the rise in the sentiment index is meaningful as economic conditions have not changed conspicuously.

The data came as the South Korean economy is facing growing inflationary pressure while economic uncertainty at home and abroad persists.

Consumer prices rose 4.2 percent in April from a year earlier, slowing from a 4.7 percent expansion in March. But consumer inflation surpassed the upper ceiling of the BOK’s 2-4 percent inflation target band for the fourth straight month.

Korean consumers in May expected inflation to reach an annual average of 3.9 percent over the next 12 months, down from a 22-month high of 4 percent polled in the previous month, according to the BOK.

In May, the BOK unexpectedly froze the key rate at 3 percent for the second consecutive month even in the face of inflationary pressure. The bank said it will take baby steps toward policy tightening down the road. The bank has raised the borrowing cost by 1 percentage point since July last year.

Meanwhile, the sub-index measuring consumers’ assessments of current economic conditions rose by 12 points to 81 in May. The index gauging their outlooks for the economy came in at 91 for this month, up from 81 in April.

The South Korean economy is on a solid growth path although the pace of the recovery is widely expected to slow down this year from last year. Asia’s fourth-largest economy is forecast to grow 4.5 percent this year, down from a 6.2 percent expansion in 2010. 

(Yonhap News)