Another statistic hints deflation is in the offing

Inflation expectations hit another record low in October, further raising concerns that deflation is inevitable.

The Bank of Korea said on Friday that inflation expectations fell to 1.7 percent in October from 1.8 percent the previous month, the lowest since data were first compiled.

Inflation expectations refer to the percentage increase in prices over a given period anticipated by consumers.

The anticipated level of inflation remained above the 2-percent level until last month, but a steep decline of inflation in recent months eroded expectations for price increases.

After a minus 0.038 percent on-year change in the consumer price index in August - which was rounded up to 0 percent - Korea posted the first negative reading of that number in September, at minus 0.4 percent.

The government cited one-time factors, such as the falling prices of agricultural products, but some market analysts and economists noted that the consumer-price level has remained far below the 2 percent target for a prolonged period and raised the possibility of Korea entering deflation.

Despite the weak inflation expectations, consumer sentiment improved this month.

The composite consumer sentiment index (CCSI) came at 98.6 in October, up 1.7 points from September, according to the data from the central bank.

A reading above 100 points indicates that a majority of survey participants have a positive outlook on the national economy, while a reading below 100 indicates that most have negative views.

The index for current economic prospects gained four points to 72, while that of future economic outlook also added two points to 77.

The components showing present livelihood status and future household income remained flat in October, and the index of consumption prospects edged up two points to 108.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]