Consumer sentiment rises in December after four-month decline on cooling inflation

A shopper browses fruits at a supermarket in Seoul. [NEWS1]

Consumer sentiment rose in December after four months of decline amid cooling inflation, a recovery in exports and hopes for an end to the U.S. Federal Reserve's rate hikes.

The composite consumer sentiment index stood at 99.5 in December, up from 97.2 the previous month, ending a four-month decline, according to a Bank of Korea survey released on Wednesday.

A reading below 100 means pessimists outnumber optimists.

The central bank said consumer sentiment improved because of slowing inflation, a rebound in exports and the growing expectations over an end in the Fed's rate-hiking cycle.

Inflation expectations fell this month compared to the previous month amid a downward trend in consumer prices, the survey showed.

The respondents expect consumer prices to rise 3.2 percent for the year ahead this month, down from the previous month's 3.4 percent.

The figures are closely watched, as their upward move could cause businesses to raise prices and workers to ask for pay raises, thereby resulting in more upward pressure on inflation.

Korea's inflation grew at a slower pace last month, though it stayed above 3 percent for the fourth consecutive month amid high prices of energy and farm goods.

Consumer prices, a key gauge of inflation, rose 3.3 percent in November from a year earlier, compared with a 3.8 percent on-year increase the previous month, marking the first time in four months that the annual price growth has eased.

The bank has predicted inflationary pressure will build up down the road, with inflation expected to stay over 3 percent around the end of the year, far higher than its target rate of 2 percent.

Last month, the bank held its key interest rate steady at 3.5 percent for the seventh straight time amid a slowdown in growth and rising household debts.

The rate freeze comes after the central bank delivered seven consecutive rate hikes from April 2022 to January 2023.

BY KIM JU-YEON, YONHAP [kim.juyeon2@joongang.co.kr]