Consumer sentiment snaps 4-month fall in December amid moderating inflation, export recovery

South Korea’s consumer sentiment snapped its four-month decline in December amid moderating inflation, a recovery in exports and hopes for an end in the Federal Reserve’s rate hikes, a central bank poll showed Wednesday.

The composite consumer sentiment index stood at 99.5 in December, up from 97.2 the previous month, ending four straight months of decline, according to the survey conducted by the Bank of Korea (BOK).

A reading below 100 means pessimists outnumber optimists.

The central bank said consumer sentiment improved amid a slowdown in inflation, a rebound in exports and the growing expectations over an end in the Fed’s rate-hiking cycle.

Inflation expectations fell this month compared to the previous month amid a downward trend in consumer prices, the survey showed.

This month, ordinary people expect consumer prices to rise 3.2 percent for the year ahead, down from the previous month’s 3.4 percent.

The figures are closely watched, as their upward move could cause businesses to raise prices and people to ask for pay raises, thereby resulting in more upward pressure on inflation going forward.

South Korea’s inflation grew at a slower pace last month, though it stayed above 3 percent for the fourth consecutive month amid high prices of energy and farm goods.

Consumer prices, a key gauge of inflation, rose 3.3 percent in November from a year earlier, compared with a 3.8 percent on-year increase the previous month, marking the first time in four months that the annual price growth has eased.

The BOK has predicted inflationary pressure will build up down the road, with inflation expected to stay over 3 percent around the end of the year, far higher than its target rate of 2 percent.

Last month, the bank held its key interest rate steady at 3.5 percent for the seventh straight time amid a slowdown in growth and rising household debts.

The rate freeze comes after the BOK delivered seven consecutive rate hikes from April 2022 to January 2023.