Korea’s consumer confidence rebounds in May led by chip boom

(Yonhap)

South Korea’s consumer sentiment rose for the first time in three months in May, led by strong semiconductor exports and a stock market rally.

According to data released by the Bank of Korea on Friday, the country’s composite sentiment index (CCSI) stood at 106.1 in May, up 6.9 points from the previous month. It marked the largest gain in 11 months, matching a 6.9-point rise in June last year.

The index had fallen sharply for two straight months on Middle East conflict concerns, slipping below 100 in April for the first time in a year, before rebounding in May. Still, it has not yet recovered to the March level of 107.

The CCSI factors in six major individual indices – current domestic economic conditions, current living conditions, prospective living standards, prospective household income, prospective household spending, current economic conditions, and prospective domestic economic conditions.

A reading above 100 indicates that people are more optimistic than pessimistic about the economy while vice versa for a reading below 100.

Among the indicators, the index of current economic conditions climbed 15 points to 83, marking the biggest gain since October 2020, when it rose 16 points.

The index of prospective domestic economic conditions rose 14 points to 93, while prospective living standards increased 5 points to 97. Current living standards rose 2 points to 93, prospective household income gained 2 points to 100, and prospective household spending also added 2 points to 110.

The BOK said upward revisions to Korea’s growth outlook by domestic and international institutions following strong first-quarter gross domestic product growth, along with a stock market rally, supported sentiment despite volatility linked to Middle East tensions.

The index of prospective interest rates, which measures expected rates six months ahead, fell 1 point to 114, its first decline in eight months, as Middle East tensions eased on reports of U.S.-Iran negotiations earlier this month.

The index of expected inflation over the next 12 months slipped 0.1 percentage point to 2.8 percent, marking the first drop in eight months.

The BOK said reports of U.S.-Iran negotiations in early May and government measures including oil price caps helped ease inflation expectations, though whether the decline lasts will depend on Middle East energy supply conditions and inflation trends.

The prospective housing prices index rose 8 points to 112, marking a second straight monthly gain. A reading above 100 indicates more consumers expect housing prices to rise over the next year.

“The increase reflected tighter housing supply in Seoul due to the resumption of heavier capital gains taxes on multi-homeowners earlier this month, rising long-term lease prices, and concerns over higher construction costs stemming from Middle East tensions,” the BOK said.