Consumer sentiment jumps and 'revenge spending' rules

People line up to buy luxury brand products at Lotte Department, located in Jung District, central Seoul. [YONHAP]

Korea's consumer sentiment hit a 14-month high in March, recovering to pre-Covid-19 levels.

The Composite Consumer Sentiment Index (CCSI) increased to 100.5 points in March, up 3.1 points from last month, according to the Bank of Korea. This is the third consecutive monthly rise and the first time Korea’s CCSI exceeded 100 since the Covid-19 outbreak in January 2020.

A CCSI reading above 100 means optimists outnumber pessimists.

Credit card spending in February hit 70.9 trillion won ($62.6 billion), up nine percent compared to same month a year earlier, according to The Credit Finance Association on Tuesday. It is up 16 percent compared to Feb. 2019 when monthly credit card payments totaled 61.2 trillion won.

Credit card companies say “revenge shopping” is one of the contributing factors, as pent up demand results in actual sales as the pandemic recedes.

Spending on automobiles rose 33 percent and spending on department store products rose seven percent in February on year, said a spokesperson for one of the credit card companies in Korea.

The spokesperson added that a jump in automobile sales is unprecedented, adding that people opted to spend on cars instead of traveling abroad.

“Increase in automobile consumption, a high priced product, means that people have high hopes of normalization,” said Koo Jeong-woo, a professor at Sungkyunkwan University’s department of sociology.

Sales of Lotte, Shinsegae and Hyundai Department Stores from Feb. 26 to 28 all increased approximately by 50 percent compared to the same period a year earlier.

In particular, sales of overseas fashion products and men’s sports products increased the most, recording 83 percent and 57 percent increases, respectively. Sales of home appliances increased by 43 percent.

“On top of high hopes for the pandemic coming to an end, seasonal changes have also sparked the increase in spending,” said a source from the retail industry. "Sales of fashion and sports brands have prominently increased.”

According to Gmarket, sales of dresses jumped 116 percent in March as of March 28 from the same period last year. Women’s golf wear, women’s coats, badminton equipment and soccer equipment sales increased 108 percent, 97 percent, 75 percent and 53 percent, respectively, during the cited period.

The increase in consumer confidence is not a phenomenon unique to Korea, but is a general trend seen globally as hopes of returning to pre-Covid-19 life amps up as progress is made on vaccinations.

According to The Conference Board, the U.S. consumer confidence index (CCI) surged to 109.7 in March, up 19.3 points from last month. Britain’s consumer confidence increased to minus 16.0 in March, up 7 points from last month’s minus 23, according to GfK Group. Both readings are the highest since March 2020.

BY HONG JI-YU, LEE TAE-HEE [lee.taehee2@joongang.co.kr]