By Yoon Ja-young
Consumer sentiment fell for the first time in seven months amid concerns over tensions between North Korea and the United States. Expectations on wages, meanwhile, are improving as the new administration focuses on expanding household income and creating more jobs.
According to the Bank of Korea, the composite consumer sentiment index for August stood at 109.9, down 1.2 points from the previous month. A reading above 100 means consumer sentiment is more optimistic than the average between 2003 and 2016. It is based on a nationwide survey of 2,200 households held from Aug. 11 to 18.
This is the first time the composite consumer sentiment index has fallen since January when it recorded 93.3. It had been rising for six consecutive months on expectations over the new government and a bullish stock market.
“From January to July, the index rose about 17 points,” said Park Sang-woo, the director in charge of statistical analysis at the central bank. “North Korea’s nuclear threat was the biggest negative factor that pulled down consumer sentiment.”
Tension escalated between Korea’s closest ally the United States and North Korea as the two countries exchanged hostile rhetoric.
North Korea’s leader Kim Jong-un threatened to strike the waters around the U.S. territory of Guam with ballistic missiles after U.S. President Donald Trump warned of “fire and fury like the world has never seen.” Tensions have since eased.
Sentiment toward current economic conditions fell to 93 from 96, while the outlook on future economic conditions stood at 104, down 5 points from the previous month.
The outlook for consumer spending, meanwhile, inched up to 109 from 108 in July.
The index gauging people’s outlook on housing prices a year from now plunged to 99 from 115, which is the biggest drop since January 2013 when the central bank started compiling the data. It rose 23 points between February and June.
“Following the government’s Aug. 2 real estate measures, people expect housing price hikes will slow down,” Park said.
The government announced anti-speculation measures on Aug. 2, which include mortgage restrictions and heavy taxes on those possessing multiple homes. The housing market is showing signs of cooling, with apartment prices in Seoul rising 0.05 percent this week, according to Real Estate 114, a housing market information provider.
The index gauging the outlook on wages, meanwhile, rose 1 point to 125, its highest. The index has been marking record highs each month for the past four months. The new administration has been shifting the focus of economic growth from conglomerates to households, introducing measures to increase household incomes and create more jobs.