Consumer Sentiment Drops in Korea to Match Dark Days of MERS

  • Korea consumer index declines for two consecutive months
  • Downturn comes as economy already hurt by slump in exports

Consumer sentiment in South Korea has dropped back to where it was last year when an outbreak of a deadly respiratory disease scared away foreign tourists and kept local shoppers at home.

A key measure of economic confidence from the central bank indicates a rising number of pessimists among Korean consumers as temporary tax cuts and retail sales promotions end while downbeat news about financial markets continues to grab headlines.

The central bank’s monthly consumer sentiment index, which hit 100 in January, underscores the fragility of domestic demand at a time when President Park Geun Hye’s government is depending on it to offset the impact of the slowdown in its exports.

“The momentum in domestic demand is unlikely to maintain growth momentum as recent boost from policy efforts will fade away,” said Kim Seong Hoon, an economist at Korea Economic Research Institute.

Gross domestic product data Tuesday showed the economy expanded 0.6 percent in the fourth quarter from the previous three months, when it jumped by 1.3 percent. While the central bank and the government both project that the economy will expand at least 3 percent this year, economists surveyed by Bloomberg estimate just 2.8 percent.

Department store sales fell 5.7 percent in December from a year earlier after rising for three months, while discount stores sales dropped 5.1 percent, the nation’s trade ministry said Wednesday, reinforcing concerns that domestic demand is weakening.

The outbreak of Middle East Respiratory Syndrome in Korea in May last year saw the number of foreigners visitors to the country halved within a matter of months while local consumer confidence slumped to the lowest level in several years.

The index is determined by surveying several thousand people on their views about subjects including income, spending, career prospects, and the property market. Respondents’ view of career prospects fell by seven points to 77 in January, while that on economic assessment also saw a 7 points drop to 68. View on income and savings also fell.

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