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Consumer Sentiment Continues to Rise
The consumer sentiment index rose to 53.4 in the fourth quarter of 2007, up 2.2 points from the previous quarter. It was the fourth consecutive quarterly increase and the second straight quarter above the neutral 50 level. The index appears to reflect a recovering economy, bullish domestic stock markets and economic expectations as to the influence of the upcoming elections on the Korean economy.
Trends in Consumer Sentiment
Consumer sentiment rises across all income brackets
Consumer sentiment moved upwards in all income brackets during the fourthquarter. The biggest gains were in the middle income brackets. Consumer sentiment for those earning between 20 million-30 million won annually rose to 52.6, up 3.1 points from the previous quarter. The index for households earning between 30 million-40 million won annually increased to 53.4, up 2.5 points from the third quarter. Both figures were well above the 2.2 point average increase.
However, consumer sentiment for those earning between 40 million-50 million, those earning more than 50 million won, and those earning less than 20 million won moved up 1.2, 2.0 and 1.6 points from the previous quarter to 53.3, 55.5 and 50.7, respectively .
Those who are in their 20s and 40s are more optimistic
Fourth-quarter consumer sentiment in all age groups was higher than the third quarter but the level of increase among younger and older adults varied. The index rose 4.2 and 3.2 points for people in their twenties and forties, respectively, to 56.0 and 53.6. That was decidedly above the 2.2 point average increase.
In contrast, the index for those in their thirties and fifties climbed 1.2 and 1.5 points to 53.9 and 52.5 points. The rise in such readings was below the 2.2 point average increase for overall consumer sentiment.
Views on economic conditions lead buoyant sentiment
The figures for present and expected economic conditions and durable goods made relatively healthy gains. Indices on present and future standards of living slightly increased above the third quarter.
The expected economic condition index, the present economic condition index, and the durable goods purchase sentiment index each rose 3.9, 3.2, and 2.6 points compared to the previous quarter. Indices on future standard of living and present standards of living grew 1.2 and 0.0 points, respectively.
Sociopolitical outlook spurs expectations of an economic recovery
Among households that responded positively on the potential for improvements in the economy for the next year, 46.2% and 19.0% based their opinion on increased perceptions of sociopolitical stability and generalized expectations of an economic recovery. Following this figure, 11.7% indicated robust exports would bring economic recovery, while 8.1% felt that this would come from improved consumption, while 6.1% felt that this would come from stabilized consumer prices. Others felt that improved investment and a recovery in employment would fuel recovery (5.2% and 3.7% each).
Rising household income lifts expectations on living standards
Among households that responded positively to questions on improved living standards, 44.7% of the households based their opinion on an increase in household income. This was followed by the 16.2% that indicated sociopolitical stability and the 13.9% that expressed generalized expectations. The remainder of the data consisted of those who anticipated declining household debt, appreciation in asset values, and stable consumer prices (11.8%, 9.8%, and 3.6%, respectively).
Marked increases in optimism regarding future c onsumption
The present consumption expenditure index posted 51.7 in the fourth quarter of 2007, up 0.2 points from the previous quarter. This is the third consecutive quarter of increases since the first quarter of 2007. The figure also went above the neutral base figure of 50.
The present consumption expenditure index for those earning less than 20 million won and for those earning more than 50 million won relatively dipped, while the readings for those earning 20 million-30 million won and those earning between 40 million-50 million won dropped slightly. By contrast, the index for those earning between 30 million-40 million won rose; this widened the gap among income brackets.
The future consumption expenditure index posted 51.2, down 1.1 points from the third quarter of 2007. However, the index surpassed the 50-point neutral mark for the third consecutive quarter since the first quarter of 2007.
Index for household net assets rises
The household asset index, which indicates changes in household assets, reached 54.1 points in the fourth quarter of 2007, rising above the benchmark of 50. The employment conditions index also edged up 2.3 points to 52.7 during the same period. That continued an upward trend for the third consecutive quarter since the first quarter of 2007 and was above 50 for the second consecutive quarter.
Durable goods, home purchases maintained upward trends
Sentiment for durable goods purchases stood at 52.0, up 2.6 points from the third quarter. This marked the third straight quarter of increases since the first quarter of 2007, all of them above 50.
Home purchasing sentiment accelerated 3.5 points to 46.8 in the same period. Upward momentum has continued for three quarters in a row since the first quarter of 2007, though remaining under the base figure of 50 for the tenth consecutive quarter since the third quarter of 2005.
Present economic conditions rise sharply
The present economic condition index stood at 46.6, up 3.2 points from the third quarter. While the index has been on an unbroken rise for four quarters in a row since the fourth quarter of 2006, it still has been below 50 for the 21 st consecutive quarter since the fourth quarter of 2002. Still, the leading business indicator reflects further economic growth momentum, which became apparent early this year.
Standard of living improves slightly
The present standard of living index reached 48.1, equal to the third quarter. It was the fifth consecutive increase since the third quarter of 2006, although the index fell below 50 for the 21st consecutive quarter since the fourth quarter of 2002.
The gap between income brackets regarding the present standard of living has somewhat shrunken. The index for all income brackets other than the income bracket earning between 20 million-30 million won and those between 30 million-40 million won declined in the fourth quarter.
Inflation concerns ease
The price expectation index, i.e. consumers' forecast on price changes, reached 70.1, down 0.2 points from the third quarter. The index has slumped in two quarters since the second quarter of 2007.
Consumer anxiety over prices has eased as concerns over rising consumer prices (including prices for personal services) have been somewhat addressed.
Consumer Sentiment Continues to Rise
The consumer sentiment index rose to 53.4 in the fourth quarter of 2007, up 2.2 points from the previous quarter. It was the fourth consecutive quarterly increase and the second straight quarter above the neutral 50 level. The index appears to reflect a recovering economy, bullish domestic stock markets and economic expectations as to the influence of the upcoming elections on the Korean economy.
Trends in Consumer Sentiment
Consumer sentiment rises across all income brackets
Consumer sentiment moved upwards in all income brackets during the fourthquarter. The biggest gains were in the middle income brackets. Consumer sentiment for those earning between 20 million-30 million won annually rose to 52.6, up 3.1 points from the previous quarter. The index for households earning between 30 million-40 million won annually increased to 53.4, up 2.5 points from the third quarter. Both figures were well above the 2.2 point average increase.
However, consumer sentiment for those earning between 40 million-50 million, those earning more than 50 million won, and those earning less than 20 million won moved up 1.2, 2.0 and 1.6 points from the previous quarter to 53.3, 55.5 and 50.7, respectively .
Those who are in their 20s and 40s are more optimistic
Fourth-quarter consumer sentiment in all age groups was higher than the third quarter but the level of increase among younger and older adults varied. The index rose 4.2 and 3.2 points for people in their twenties and forties, respectively, to 56.0 and 53.6. That was decidedly above the 2.2 point average increase.
In contrast, the index for those in their thirties and fifties climbed 1.2 and 1.5 points to 53.9 and 52.5 points. The rise in such readings was below the 2.2 point average increase for overall consumer sentiment.
Views on economic conditions lead buoyant sentiment
The figures for present and expected economic conditions and durable goods made relatively healthy gains. Indices on present and future standards of living slightly increased above the third quarter.
The expected economic condition index, the present economic condition index, and the durable goods purchase sentiment index each rose 3.9, 3.2, and 2.6 points compared to the previous quarter. Indices on future standard of living and present standards of living grew 1.2 and 0.0 points, respectively.
Sociopolitical outlook spurs expectations of an economic recovery
Among households that responded positively on the potential for improvements in the economy for the next year, 46.2% and 19.0% based their opinion on increased perceptions of sociopolitical stability and generalized expectations of an economic recovery. Following this figure, 11.7% indicated robust exports would bring economic recovery, while 8.1% felt that this would come from improved consumption, while 6.1% felt that this would come from stabilized consumer prices. Others felt that improved investment and a recovery in employment would fuel recovery (5.2% and 3.7% each).
Rising household income lifts expectations on living standards
Among households that responded positively to questions on improved living standards, 44.7% of the households based their opinion on an increase in household income. This was followed by the 16.2% that indicated sociopolitical stability and the 13.9% that expressed generalized expectations. The remainder of the data consisted of those who anticipated declining household debt, appreciation in asset values, and stable consumer prices (11.8%, 9.8%, and 3.6%, respectively).
Marked increases in optimism regarding future c onsumption
The present consumption expenditure index posted 51.7 in the fourth quarter of 2007, up 0.2 points from the previous quarter. This is the third consecutive quarter of increases since the first quarter of 2007. The figure also went above the neutral base figure of 50.
The present consumption expenditure index for those earning less than 20 million won and for those earning more than 50 million won relatively dipped, while the readings for those earning 20 million-30 million won and those earning between 40 million-50 million won dropped slightly. By contrast, the index for those earning between 30 million-40 million won rose; this widened the gap among income brackets.
The future consumption expenditure index posted 51.2, down 1.1 points from the third quarter of 2007. However, the index surpassed the 50-point neutral mark for the third consecutive quarter since the first quarter of 2007.
Index for household net assets rises
The household asset index, which indicates changes in household assets, reached 54.1 points in the fourth quarter of 2007, rising above the benchmark of 50. The employment conditions index also edged up 2.3 points to 52.7 during the same period. That continued an upward trend for the third consecutive quarter since the first quarter of 2007 and was above 50 for the second consecutive quarter.
Durable goods, home purchases maintained upward trends
Sentiment for durable goods purchases stood at 52.0, up 2.6 points from the third quarter. This marked the third straight quarter of increases since the first quarter of 2007, all of them above 50.
Home purchasing sentiment accelerated 3.5 points to 46.8 in the same period. Upward momentum has continued for three quarters in a row since the first quarter of 2007, though remaining under the base figure of 50 for the tenth consecutive quarter since the third quarter of 2005.
Present economic conditions rise sharply
The present economic condition index stood at 46.6, up 3.2 points from the third quarter. While the index has been on an unbroken rise for four quarters in a row since the fourth quarter of 2006, it still has been below 50 for the 21 st consecutive quarter since the fourth quarter of 2002. Still, the leading business indicator reflects further economic growth momentum, which became apparent early this year.
Standard of living improves slightly
The present standard of living index reached 48.1, equal to the third quarter. It was the fifth consecutive increase since the third quarter of 2006, although the index fell below 50 for the 21st consecutive quarter since the fourth quarter of 2002.
The gap between income brackets regarding the present standard of living has somewhat shrunken. The index for all income brackets other than the income bracket earning between 20 million-30 million won and those between 30 million-40 million won declined in the fourth quarter.
Inflation concerns ease
The price expectation index, i.e. consumers' forecast on price changes, reached 70.1, down 0.2 points from the third quarter. The index has slumped in two quarters since the second quarter of 2007.
Consumer anxiety over prices has eased as concerns over rising consumer prices (including prices for personal services) have been somewhat addressed.