Consumer sentiment rebounds in April

South Korea’s consumer co nfidence rebounded for the first time in five months in April on the back of optimism about the economic recovery, the central bank said Tuesday.

The consumer sentiment index (CSI) ― a gauge of consumers’ overall economic outlook, living conditions and future spending ― stood at 100 for April, up from 98 in March, the Bank of Korea (BOK) said in a monthly report.

The April index rose for the first time since November when it gained by two points on-month to 110. The survey, based on a poll of 2,071 households in 56 major cities, was conducted from April 13-20.

A reading below the benchmark 100 means pessimists outnumber optimists. The index, widely used to gauge the future direction of private spending, rebounded to a par after falling below the 100-point level for the first time in 23 months in March.

“The index rebounded in April as consumer sentiment was hit hard in March by an array of negative news, including the powerful earthquake in Japan and political unrest in the Middle East,” said Jang Wan-sub, an official at the BOK.

The index came as the South Korean economy is facing growing inflationary pressure, aided by sustained economic growth and rising oil and food prices.

The risks of high inflation weigh consumer sentiment as they expect higher inflation expectations down the road, the BOK noted.

South Korean consumers in April expected inflation to reach an annual average of 4 percent over the next 12 months, up from 3.9 percent polled in the previous month, according to the BOK. The April figure was the highest since 4.1 percent in June 2009.

In April, the BOK froze the key rate at 3 percent amid lingering economic uncertainty, but it said it will take baby steps toward policy tightening down the road. The bank has raised the borrowing costs by 1 percentage point since July last year.

The country’s consumer prices jumped 4.7 percent in March from a year earlier, surpassing the upper ceiling of the BOK’s 2-4 percent inflation target band for three months in a row.

The central bank revised up its 2011 inflation estimate to 3.9 percent, up from its earlier estimate of 3.5 percent.

Meanwhile, the sub-index measuring consumers’ assessments of current economic conditions rose by 5 points to 69 in April. The index gauging their outlooks for the economy came in at 81 for this month, up from 75 in March.

The South Korean economy is on a solid growth path although the pace of the recovery is widely expected to slow down this year from last year. Asia’s fourth-largest economy is forecast to grow 4.5 percent this year, down from 6.2 percent expansion in 2010. 

(Yonhap News)