Consumers’ confidence in the economy weakening

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Consumers’ confidence in the economy weakening

Consumer confidence in the Korean economy weakened to the worst level since the global financial meltdown in 2009 due to growing uncertainties about the effect of the Choi Soon-sil scandal on governance and the recent election in the United States.

According to the Bank of Korea (BOK) Friday, the composite consumer sentiment index (CCSI) stood at 95.8 in November, down 6.1 points from the previous month. The figure fell to the lowest level in 7 years and 7 months, or since April 2009, when it was 94.2.

A reading above 100 points indicates the majority of survey participants maintain a positive outlook on the national economy, while a reading below 100 indicates a negative view.

“It appears that growing uncertainties coming from within the country and overseas, including the political scandal surrounding the president and Choi Soon-sil and the recent presidential election in the United States, have dragged down consumer sentiment significantly this month,” said Joo Sung-jae, head of the statistics department at the BOK. “Other economic figures that remain weak, such as for exports and domestic consumption, also might have caused the November figure to decline.”

Last month’s figure fell below the 100 level for the first time since June, when it was 98.8. The index rose to 100.9 in July and remained over 101 from August to October.

According to the survey, Korean households now feel that they are less likely to spend money on clothes, dining out and travel. The index for how they will spend in the future specifies different types of spending. The figure for clothes dropped 4 points from 102 in October to 98. The figure for dining out and travel dropped 3 points compared to the previous month to record 88 each.

Spending on housing-related expenses was the only category that went up. It rose 1 point from 105 to 106.

The BOK survey found sentiment on household finances pessimistic, and the figure dropped from 92 in October to 90 this month. In terms of future prospects for household finances and household incomes, the index also fell from 101 to 98 in the same period.

Future prospects for the labor market dropped 11 points from 79 in October to 68 this month.

The majority of Koreans considered public utility charges one of the biggest factors that will have an impact on consumer prices in the near future.

According to the survey, 56.4 percent of the survey respondents said public utility charges will boost consumer prices, and 41.4 percent said housing prices were one of the biggest factors that will raise inflation in Korea. Multiple answers were allowed.

The BOK surveyed 2,200 households from Nov. 11 to 18.

Meanwhile, Choi Sang-mok, vice minister of Strategy and Finance held a meeting with officials from the BOK, Financial Supervisory Service and Financial Services Commission on Friday to discuss possible changes in the incoming U.S. administration.

“Those who attended the meeting said that the uncertainties in Korea’s financial market are growing rapidly due to a possible interest hike in the United States and the incoming administration’s possible policy changes,” said Joo Hwan-wook, a director at the Finance Ministry. “The government will closely monitor the changes and high household debt problem to minimize the negative impact.”

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]

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