Consumer Sentiment Dips, Inflation Expectations Rise - Likely To Be A BoK Watch Point

South Korea's headline consumer sentiment index fell to 100.7 from 101.9 in March. This was the first fall since Nov last year, ending a 3 month run of gains. The index is comfortably above 2022 lows, but isn't suggesting a run away pick up in GDP growth. The first chart below plots the headline CSI against y/y GDP growth.

• This is consistent with parts of the domestic economy still feeling pressure from tighter monetary policy settings.
• In terms of the details from the survey, expectations around the economy were unchanged from Feb, although living standards slipped. Consumer spending plans were unchanged versus Feb levels.

Fig 1: South Korea CSI Headline Versus GDP Y/Y

Source: MNI - Market News/Bloomberg

• On the prices front, we saw an uptick in terms of the expected inflation level. The second chart below plots this measure against headline CPI Y/Y.
• This is likely to be a watch point for the BOK. The authorities have been mindful of a pick up in inflation pressures in the early part of 2024, but have expected such pressures to dissipate as the year unfolds.
• While inflation expectations are comfortably sub 2022 highs, we are also some distance from being back at levels consistent with the inflation target of around 2%. The BoK is unlikely to cut rates until it is confident inflation is heading back to this level.

Source: MNI - Market News/Bloomberg