Korea’s expected inflation rate down three straight months to 3.5% in May

2023.05.23 12:08:01 | 2023.05.24 10:02:53

[Photo by MK DB]이미지 확대

[Photo by MK DB]



The expected inflation rate, an outlook for consumer prices, has fallen for the third consecutive month to the mid-3 percent range in May.

According to the results of a May consumer trend survey released by the Bank of Korea (BOK) on Tuesday, the expected inflation rate for May was 3.5 percent, down from 3.7 percent in April. It is the lowest in a year since May last year, when the number was 3.3 percent.

The expected inflation rate, which indicates the outlook for the coming year, has declined for the third straight month to 3.5 percent in May from 4.0 percent in February, 3.9 percent in March, and 3.7 percent in April.

“It is largely attributed to the decline in consumer price inflation to the 3 percent level in 14 months,” said Hwang Hee-jin, head of the statistics team at the BOK. “(The expected inflation rate) dropped only slightly on reports that the electricity and gas bills will be raised and as food, personal service and industrial product prices have yet to fully stabilize.” Hwang also said that the trend “remains to be seen given the variables such as the severity of the economic slowdown, international oil prices, and possibility of an additional public utility hike.”

The composite consumer sentiment index (CCSI) for May, in the meantime, was 98.0, up 2.9 points from 95.1 in April. It is the highest level in a year since 102.9 in May last year. The CCSI factors in six major individual indices - current living conditions, living conditions forecast, household income forecast, spending forecast, current economic assessment, and economic outlook - among the 15 indices that comprise the consumer sentiment index (CSI). It means optimistic consumer sentiment compared with the long-term average between 2003 and 2022 if it is higher than 100 and pessimistic if it is below 100.

“Expectations for easing of contracted domestic demand amid a recovery in consumption have boosted the figure despite concerns over an economic slowdown,” Hwang said.

The CSI in May rose from April but remains below 100, indicating that a negative outlook still prevails.

All six indices that make up the CCSI gained from April, mainly led by improved economic assessment and economic outlook, both up 6 points. The index of living conditions forecast also increased 2 points while current living conditions, household income forecast, and spending forecast gained 1 percent each.

“Economic conditions are more volatile than other indices,” Hwang said. “It appears to reflect expectations for a domestic demand recovery in face-to-face services with the shift to endemic.”

The consumer sentiment on interest rates for May was 114, up 3 points from 111 in April. The index tops 100 if more people predict a higher interest rate in six months.

The housing price index in May was 92, up five points from 87 in April as the decline in housing prices continued to slow.

The consumer sentiment for living costs dropped 2 points from the previous month to 146.

The BOK data is based on the response of 2,351 households out of 2,500 households surveyed nationwide between May 8 and 15.

By Pulse

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