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S. Korean consumer sentiment dips in June

SEOUL, (Yonhap) -- South Korea's consumer confidence declined in June from the previous month on concerns that rising inflation and growing household debt could crimp consumer spending, the central bank said Friday.

The consumer sentiment index (CSI) -- a gauge of consumers' overall economic outlook, living conditions and future spending -- stood at 102 for June, down from 104 for May, the Bank of Korea (BOK) said in a monthly report.

The sentiment index fell in June after rising for the second consecutive month in May. The index, a gauge of future private spending, fell below the 100-point level for the first time in 23 months in March.

A reading above the benchmark 100 means optimists outnumber pessimists. The survey, based on a poll of 2,018 households in 56 major cities, was conducted from June 13-20.

"The index declined on concerns that rising interest rates and snowballing household debt would undercut consumers' capacity to spend," said Jang Wan-sub, an official at the BOK.

"Lingering concerns about Greece's sovereign crisis also increased economic uncertainty, hurting consumer sentiment in June."

The data came as the South Korean economy is facing growing inflationary pressure amid lingering economic uncertainties at home and abroad. Growing household debt, which reached around 800 trillion won (US$742.1 billion) as of end-March, is also becoming a source of headaches for policymakers as heavy indebtedness is feared to curb economic growth.

The growth of South Korea's consumer prices surpassed the upper ceiling of the BOK's 2-4 percent inflation target band for the fifth straight month in May.

Core inflation, which excludes volatile oil and food prices, rose 3.5 percent on-year in May, up from 3.2 percent in April and marking the highest level in 23 months.

South Korean consumers in June expected inflation to reach an annual average of 3.9 percent over the next 12 months, unchanged from expectations in the previous month, according to the BOK.

To tame inflation, the central bank hiked the key rate to 3.25 percent, the third rate increase this year.

Meanwhile, the sub-index measuring consumers' assessments of current economic conditions fell by 4 points to 77 in June. The index gauging their outlooks for the economy reached 86 for June, down from 91 in May, the BOK said.


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