By Kim Tong-hyung
Consumer confidence rose to a four-month high in March thanks to eased concerns over Europe’s sovereign debt crisis, the Bank of Korea (BOK) said.
However, it’s hard to say the numbers shed a glimmer of light on the economy when consumers’ prospects of improved finances and spending capabilities remained cloudy.
The central bank’s consumer sentiment index climbed to 101 in March from February’s 100, increasing for the second consecutive month and presenting the first 100-plus figure since November’s 103. A reading above 100 indicates optimists outnumber pessimists.
Consumers’ expected inflation over the next 12 months was measured at 3.9 percent, dipping below 4 percent for the first time since June last year, reflecting the improved confidence in the economy. Policymakers here aim to suppress inflation below 4 percent for this year.
The bank’s monthly report was based on a survey of around 2,000 households nationwide conducted from March 13 to 20.
Government officials have been taking a closer look at consumers’ attitudes in recent months. With worsening global conditions taking a bite out of exports, they need consumption to pick up the slack.
The rise in the March index alone seems insufficient as an indicator for a meaningful improvement in people’s willingness to spend. The sub-indexes on living conditions and consumption levels have declined or flattened. And BOK officials admitted that consumers might be too optimistic about the cost of living in coming months.
Consumer prices rose 3.1 percent annually in February, slowing from a 3.4 percent gain the preceding month. However, there are worries that inflation will peak again on rising energy bills as global crude oil prices continue to rise on geopolitical uncertainty
Gasoline prices in Seoul remain at an elevated level after soaring to historic highs in February. Manufacturers are also concerned about rising fuel costs deteriorating profitability.
``Despite the instability in consumer prices driven by higher fuel costs, the sentiment index rose above 100. However, it’s uncertain whether the index will continue to stay above 100,’’ said an official from the bank’s economic statistics team.
A separate report by the Korea Chamber of Commerce and Industry (KCCI), based on a poll of 500 local households, showed more than 70 percent of the respondents were expecting to cut their overall spending in coming months to cope with stagnant income and rising prices.
More than 94 percent of the respondents said they were more aware of the level of consumer prices than a year before.
Morgan Stanley, the influential U.S. investment bank, predicted Korea’s level of consumer spending to subdue in the next two to three quarters due to the high levels of household debt, sluggish housing sector and fuel-driven inflation.