Frozen Consumption Psychology

Owing to domestic and foreign unfavorable factors such as a contraction of an industry for domestic demand and a possibility of USA-Iraq, a consumption psychology has been frozen at rapid rate.

Korea National Statistical Office said on November 13, “As results of `investigation on consumer prospect of October`, `Consumer Expectation Index` was 97.1, decreased to below 100 for the first time for 11 months. Being below 100, index means that there are many people who consider a bad economy.

Also, `consumer evaluation index` dropped to 86.8 and so the economy has already been depressed.

Consumer expectation index continued to increase this year and showed the highest point of 110.6 in June. However, after that, it has decreased to △107.8 in July, △ 106.2 in August and △103.9 in September gradually.

In addition, the consumer evaluation index increased to 108.1 in June, but decreased to △ 105.2 in July, △ 102.1 in August and △97.2 in September. It dropped to 80 in October and so it was lower than last December (89.2%).

In particular, among 5 items making the consumer expectation index, the business prospect fell down to 87.8 decreased by 20 points over September (105.9) and so consumers consider the future business to be dark moderately,

In terms of a different income class, there is 91.3 for people with below the monthly average income of KRW 1 million. It showed a big difference compared with 97.5 of income earners with above KRW 3 million. Accordingly, the lower the income is, the harder the life is.

Such as assets, incomes and liabilities, the evaluation on general household condition is pessimistic.

Showing the asset value compared with one prior to 6 months, the asset survey index fell down by 0.7~9.1 points over September for all assets including the real properties and finance.

For the type of assets, the real properties dropped to 102.5, the lowest point a year. Also, the financial saving fell down to 95.2 and the securities and bonds fell down to 71.5.

Kwang-Hyun Kim kkh@donga.com