▲ Consumer sentiment is frozen by the sharp rise in prices. The photo is a menu board at a restaurant in Seoul ⓒ Yonhap News
The expected inflation rate, a measure of the inflation outlook for the next one year, has reached its highest level in ten years. This means that although the inflation rate soared to below the chin of 5% last month, there is a widespread perception that it has not yet reached its peak.
According to a consumer trend survey released by the Bank of Korea on the 24th, the Consumer Confidence Index (CCSI) in May was 102.6, down 1.2 percentage points from April. Despite the improvement in consumer sentiment following the lifting of social distancing, negative factors such as continued inflation, increased uncertainty in the financial market, and prolonged Ukraine crisis were overlapping.
According to the detailed survey, the current living conditions index fell by 0.8%p, and the living conditions prospects index also fell by 0.3%. This means that real life has become more difficult due to inflation and interest rate hikes. The household income outlook also decreased by 0.4%p, and the consumption expenditure forecast increased by 0.7%p. The current economic evaluation index was the same as the previous month, but the future economic outlook fell by 0.4%p, raising concerns regarding stagflation and slow growth.
The interest rate level outlook index recorded an all-time high of 146. In addition to the four key rate hikes, the 2% interest rate forecast by the end of the year has come out, and inflation concerns seem to have increased.
The housing price outlook index was 111, down 3p from the previous month, which recorded an all-time high. While apartment sales prices across the country remain flat, expectations for an increase in supply appear to have been reflected in the midst of the multi-family transfer tax and the exclusion of a limited time.
The price perception index and expected inflation rose 0.2 percentage points to 3.2% and 3.1%, respectively. This is the fifth consecutive month of growth since 2.6% in January. It is the first time in 10 years since 2013 that the expected inflation rate reached the 3% level.
The proportion of responses to items that have an impact on inflation was petroleum products (70.8%), livestock and fishery products (38.7%), and utility bills (35.1%). Compared to April, the proportion of responses to industrial products and agricultural and livestock products increased by 1.7%p and 1.6%p, respectively, while petroleum products decreased by 4.4%p.
Looking at the distribution of responses to the expected inflation rate, those who expected a 1~3% increase decreased by 5.6%p and those who expected a 3~4% increase by 2.6%p. The number of respondents who expected more than 4% also increased by 1.7%p. This means that consumer prices are gradually increasing.
Lee Jong-hyeon, head of the BOK’s Economic Statistics Bureau, said, “The increase in expected inflation is the result of many consumer responses saying that the inflation rate will continue in the future as the perceived price rises.” It can be adjusted depending on the circumstances,” he explained.