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Consumption to remain sluggish, despite sentiment improvement

Jan. 27, 2015 - 21:02 By Park Hyung-ki

South Korea’s consumer sentiment index rose for the first time in four months in January, but consumers are expected to further tighten their spending amid a slow economic recovery and high household debt, the Bank of Korea said Tuesday.

The consumer sentiment index stood at 102 this month, up from 101 a month before.

The index improved after months of decline since the Sewol ship sinking, which adversely affected private spending and investment.

Although the index is above 100, showing more optimism than pessimism, January's consumer sentiment is still below that of last May, when it stood at 104 in the aftermath of the Sewol devastation.

Analysts expect household spending to slow on the back of lower growth.

The central bank recently slashed its growth outlook to 3.4 percent from its initial forecast of 3.9 percent due to weak private investment and consumption.

BOK Gov. Lee Ju-yeol recently said that the country’s overall economy would improve this year, but that the benefits might not be felt by the general public. The central bank stressed “stabilizing debt,” which increased following its interest rate cuts last year.

A survey by Korea Trade-Investment Promotion Agency showed that 35 percent of 886 Korean exporters were pessimistic about this year’s economy, while only 23 percent said they were optimistic. The rest were neutral.

By Park Hyong-ki (hkp@heraldcorp.com)