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Consumer sentiment still weak but improved

Sept 27,2019
Consumer sentiment rebounded from a month earlier in September, but the expected inflation level hit an all-time low.

The composite consumer sentiment index was 96.9 this month, up 4.4 points from August, according to the data from the Bank of Korea released Thursday.

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.

Despite the reading below the 100 threshold, the central bank cited subdued worries over the U.S.-China trade war and economic stimulus packages as the reasons behind the improved sentiment.

“The pessimistic view on economy and household income eased thanks to better prospects on the U.S.-China trade dispute, stimulus policies at home and abroad and rising stock market indexes,” the bank said in a statement.

The upturn reverses the trend of the decline for four consecutive months.

One concern was expected inflation. At 1.9 percent, it was the lowest since the statistic was first compiled.

The expected inflation rate refers to the percentage increase in the level of prices over a given period anticipated by participants in an economy.

The anticipated level of inflation had remained above the 2 percent range, but a steep decline of inflation could dampen people’s expectation for price increases.

With a minus 0.038 percent on-year change in the consumer price index in August, Korea posted the first negative reading of that number since it was first tracked in 1965.

The historically-low figure resulted in a flurry of worries - especially fears of deflation.

Against this backdrop, Shin In-seok, a member of the monetary policy board at the Bank of Korea, said earlier this month that the decrease in the expected inflation rate could also weaken the effects of monetary policy.

The outlook on consumer prices fell by six points to 134.

Many forecast that housing prices will continue to edge up, as the index for price trends in the real estate market jumped two points to 109.

The central bank survey found household finance sentiment improved, as it was up two points at 92. In terms of future prospects for household finances and income, the index increased three points to 97 in September.

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