[EDITORIALS]Bad signs for the economyPositive consumer sentiment is deteriorating: The Consumer Expectation Index, which measures consumers’ optimism about the domestic economy and living conditions over the next six months, declined by 2.8 points over March, falling to 100.6 last month. A reading below 100 means that a majority of consumers forecast that economic conditions will deteriorate. The index has fallen for the last three straight months, after peaking at 104.5 in January. The seasonally adjusted index for April was 96.6 ― the first time the figure was below 100 in eight months.
Adding to this drop is the fact that the Leading Economic Indicator, a composite index of indicators preceding the economic cycles that was released last month, fell for the second consecutive month.
The Consumer Present Situation Index, which measures consumers’ feelings about the domestic economy and their living conditions compared to those six months ago, was 87.2 last month, down 2.9 points from March, also marking the first drop in eight months. It means that consumers feel that the current economic situation is not good and do not expect it to improve. Few people would expect domestic demand to recover in this situation. Consumers seem to have sensed the state of the economy without having to apply complicated economic theories.
In addition, high oil prices and the rise of the won against the dollar are torturing Korean companies. According to a survey, one third of the local companies listed on the Korea Exchange failed to cover their interest payments with their operating incomes last year, indicating that the profitability of companies is rapidly deteriorating.
With the economy showing no sign of improvement, the negative factors inside and outside the nation are piling up. Yet the government is placid. Finance Ministry officials have repeatedly said that if international crude oil prices and local currency value against the dollar continue to rise, it could hurt the domestic economy in the second half. But they insist it is too early to worry. In fact, the government has no specific plan to boost the economy. High international oil prices and the won’s value against the greenback are problems the government cannot handle. President Roh Moo-hyun was on to this when he said, “We will never use artificial measures to boost the economy.”
But the government cannot just sit idly, waiting for the economy to improve. It needs first to wake up and face facts about the current economic conditions. It should then consider how to cope with them.