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Cabbages are displayed at a large supermarket in Seoul. / Reporter Song Eui-ju

Amid a domestic stock market correction and the cumulative burden of price hikes, consumer sentiment fell this month for the first time in four months. Despite favorable trends in the real economy, heightened stock price volatility led to a sharp deterioration in consumer assessments of current economic conditions, while outlooks for household income and consumer spending also declined in tandem. Expectations for rising housing prices, which had climbed rapidly in recent months, cooled slightly under the influence of tax reforms and housing supply measures.

According to the "August Consumer Survey Results" released by the Bank of Korea on the 25th, this month's Composite Consumer Sentiment Index (CCSI) stood at 104.5, down 2.3 points from the previous month. The CCSI had rebounded from 99.2 in April to 106.1 in May, continuing its upward trend to 106.6 in June and 106.8 in July, before turning downward after four months.

The CCSI is calculated based on six component indices: current living standards, prospective living standards, prospective household income, prospective consumer spending, current domestic economic conditions, and prospective domestic economic conditions. A reading above 100 indicates that consumer sentiment is more optimistic than the long-term average. Although the index dropped this month, it remained above the baseline of 100.

The Consumer Survey Index (CSI) for current domestic economic conditions fell by 5 points from 84 to 79, marking the steepest decline among the component indices. This was driven by an increase in consumers assessing current economic conditions negatively as volatility in the stock market expanded.

The prospective domestic economic conditions CSI also slipped 3 points from 92 to 89. The CSI for current living standards stood at 92 and prospective living standards at 97, each down by 1 point. The CSI for prospective household income and prospective consumer spending fell 1 point each to 100 and 109, respectively.

Park Yong-min, head of the Economic Sentiment Survey Team, explained, "Although consumer inflation slowed from 3.2% to 2.8% in July, the cumulative effect of high growth rates exceeding 3% in living costs and related items appears to have weakened perceived economic conditions."

Expectations for housing price gains, which had surged recently, eased somewhat. The housing price outlook CSI, which reflects expectations for home prices one year ahead, came in at 125, down 2 points from the prior month. After climbing swiftly from 96 in March to 104 in April, 112 in May, 120 in June, and 127 in July, it fell for the first time in five months. However, remaining well above 100, the figure indicates that consumers expecting home prices to rise still outnumber those projecting a decline.

The expected inflation rate over the next year remained unchanged from the previous month at 2.7%. It is analyzed that while the prolonged stalemate in Middle East conflicts acted as an upward pressure on prices, expectations regarding benchmark interest rate hikes and the decline in the won-dollar exchange rate served as downward factors, keeping expected inflation at the previous month's level. Petroleum products were cited as the primary item expected to affect inflation over the next year, with the highest response rate at 50.2%.

                                                                                                       Han Sang-wook