By Kim Jae-kyoung
Staff Reporter
Soaring oil prices coupled with a deepening economic downturn have sent consumer sentiment to its lowest level since the Asian financial crisis in 1998, fanning worries over a further slowdown in domestic demand.
Falling consumer sentiment has increased predictions that the economy will worsen at a faster pace in the coming months, forcing people to tighten their belts, particularly on basic items, such as clothing and food.
In a second-quarter survey of 2,500 households in 30 cities, the Bank of Korea (BOK) found that its consumer survey index (CSI), measuring predicted economic conditions for the next six months, plunged to 52, a drastic setback from 96 in the first quarter.
The figure is well below the benchmark 100. A CSI reading below 100 indicates pessimists outnumber optimists in consumer sentiment.
The figure of 52 is the lowest level in almost 10 years, when the index stood at 42 during the third quarter of 1998.
The index measuring current economic conditions also fell to 40 during the April-June period, down 26 points from a quarter ago, the lowest since it hit 27 also in the third quarter of 1998.
The index on future spending fell to 102 from 113. In particular, the index on spending on clothing and dining-out dropped sharply to 91 and 79, respectively, from 103 and 89.
``Consumer sentiment contracted significantly in the second quarter due to rising prices caused by high-flying oil costs and a sluggish job market,'' a BOK official said.
``More households feel the economy will slow further, which we believe will make them cut their spending on clothing and dining-out,'' he added.
Strategy and Finance Minister Kang Man-soo told reporters Wednesday that consumer prices were likely to accelerate in June.
``Consumer inflation is expected to rise to the 5-percent level in June,'' he said. ``If oil prices continue to rise, it will be inevitable for people and companies to shoulder the burden together.''
Consumer prices soared 4.9 percent in May from a year earlier, the fastest pace in seven years and well above the central bank's target range.