South Korean consumer confidence strengthened to a nearly three-year high in May, fueling optimism that the economy is on track for a strong recovery from the pandemic crisis.
The consumer confidence index rose for a fifth consecutive month to 105.2, the highest since June 2018, the Bank of Korea said in a statement on Tuesday. A reading above 100 indicates that optimism trumps pessimism.
The improvement was driven by stronger than expected economic growth in the first quarter, positive export performance, progress in vaccinations and better employment data, according to the central bank.
Alongside a With a 53% increase in exports so far this month, the stronger sentiment reading is likely to be among the recent data the BOK board will review on Thursday for its rate decision and growth projections. All the economists questioned see the BOK keeping its key rate in suspense. Most of them also expect a significant upgrade from the current forecast of a 3% expansion this year.
Korea has so far started an export-led recovery, but growing confidence bodes well for private consumption amid signs of recovery.
Among the components of the overall index, household assessment of the current economy contributed the most to the increase, followed by their views on the economy and future spending.
Household inflation expectations for the next 12 months have weakened slightly until 2.2%, a two-year high. Their outlook for interest rates reached 118, the strongest since the start of 2019, indicating that more people expect rates to rise rather than fall.
The survey of 2,298 households was conducted from May 10 to 14.