Domestic demand feared to be further dented in Q2: analysts

South Korea's domestic demand is feared to have been further sapped in the second quarter as the deadly sinking of the passenger ferry Sewol is likely to crimp consumer spending, analysts said Monday.

Korea's cyclical component of the composite leading index came in at 101.2 in March, down 0.3 percentage point from the previous month, according to the statistics agency. The index is used to predict turning points in business cycles.

The index declined for the second straight month after hitting 101.6 in January following a rise for four straight months, the data showed.

The cyclical component of the composite coincident index reached 100.7 in March, unchanged from the previous month, the data showed. The index measures current economic situations.

In what may be a worrying sign, private spending rose 0.3 percent on-quarter in the first quarter after advancing 0.6 percent in the fourth quarter, according to the data by the central bank.

Experts said that in the second quarter, consumer spending may be further crimped following the deadly sinking of the ferry Sewol.

The 6,825-ton Sewol sank on April 16, with hundreds of high school students on a field trip aboard. The death toll has hit nearly 260, with some 40 people still missing. A number of industries are seeing slumps as people saddened by the accident are shunning spending.

"There is a possibility that the recovery of domestic demand may slow in the second quarter. Downside risks increased compared with the first quarter," said Lee Seung-hoon, an analyst at Samsung Securities Co.

He said that the Sewol tragedy may hurt consumer sentiment in the short term and business suspensions of mobile carriers by the telecom regulator could reduce sales of smartphones.

Korea's consumer sentiment remained flat for the third consecutive month in April, according to a separate report by the Bank of Korea (BOK).

The consumer sentiment index (CSI) came in at 108 for April, unchanged from the previous month, it showed. The index is a gauge of consumers' overall economic outlook, living conditions and future spending.

The sub-index measuring economic outlook came in at 101 for April, down from 102 in the previous month, the data showed.

"In the first quarter, consumption was sapped. As income growth basically remains tepid, it is hard to boost domestic demand," said Jun Min-kyu, an economist at Korea Investment Corp. (Yonhap)