Buoyed by cash handout, S. Korea’s consumer sentiment improves in May

A month after hitting an all-time low in nearly a decade, South Korea’s consumer sentiment improved in May, with the government’s cash relief handout contributing to the rebound, data from the central bank showed Tuesday.

The nation’s composite consumer sentiment index -- a leading indicator that reflects households’ consumption and saving -- increased 6.8 points on-month to 77.6, recovering from the previous month, but was still well-below the pre-COVID-19 sentiment. A reading below 100 means pessimists outnumber optimists.

The index started to plummet below 100 since February, when reports of the novel coronavirus outbreak started to surface. It dropped to 96.9 in February and gradually to 70.8 in April, which marked the lowest level since December 2008, when the country was reeling from the global financial crisis.

“Due to eased social distancing rules both domestically and outside the country, resumed economic activities (in support of) government’s (stimulus) economic measures, the index was able to improve in May as the spread of the coronavirus has been slowing down,” the BOK said.

“The payout of emergency disaster relief funds contributed to the improvement in the index as well,” it added.

Earlier this month, Korea started handing out cash to most households here for its relief handout program. Households with four or more people get 1 million won ($810), while those with fewer family members receive a minimum of 400,000 won.

The BOK, however, hinted that the index remains volatile and that the effects of the relief handout is temporary, saying that the development of the situation surrounding the latest pandemic will determine the index’s momentum.

Inflation expectations for the next 12 months, which is a yardstick for consumer optimism, inched down 0.1 percentage point to 1.6 percent, marking the lowest since February 2002.

The nation’s daily virus caseload plummeted below 20 in recent weeks, but the government has been maintaining a cautious stance with the recent sporadic infections linked to the Itaewon nightclub cluster having swept across the nation.

The monthly index is based on a survey of 2,500 households. This month, it was based on 2,370 households and taken from May 11 to May 18.

By Jung Min-kyung (mkjung@heraldcorp.com)