Consumer sentiment rises just a bit

Koreans felt the economy got a little better, according to a consumer sentiment survey, but they still don’t want to open their pocketbooks despite a cut in interest rates.

According to the Bank of Korea Friday, Korea’s April domestic consumption index rose by 3 points to 104.

This is a small but meaningful rise because it suggests the domestic economy is gaining some momentum for the first time since the tragic sinking of the ferry Sewol last April.

The BOK’s Composite Consumer Sentiment Index (CCSI) consists of multiple indices representing the economy and is based on surveys of some 2,200 households nationwide. The surveys ask about people’s feelings about the economy and inflation rate, actual monthly spending and savings, and their household debt.

A CCSI index over 100 points means that more survey participants gave positive answers about consumer sentiment.

Six sub-indices about household incomes and spending now and looking ahead six months all rose by 2 points, to linger near 100 points. In particular, the household spending forecast sub-index maintained a 106-point level.

Indices about employment opportunities and interest rates rose by 2 and 4 points to reach 84 and 93 points. Both indices are still below the 100 mark, but both implied that the BOK’s March decision to lower the base interest rate to 1.75 percent partially contributed to enhancing people’s optimism.

But the results don’t indicate that consumers felt like opening their wallets.

A sub-index regarding inflation and property price forecasts for the next year each fell by 1 point to 129 points and 122 points respectively.

In particular, the expected future inflation rate, in which domestic consumers estimate the inflation rate one year later, was unchanged at 2.5 percent - the lowest level since 2002 when the BOK started gathering data - for the second straight month.

Usually consumers tend to spend when they expect the inflation rate will rise in the near future.

Therefore, this is a sign that the BOK’s base rate cut hasn’t yet encouraged people to spend.

BY KIM JI-YOON [kim.jiyoon@joongang.co.kr]