Consumer Sentiment To Multi Year Highs, Inflation Expectations Edge Down

South Korea's July consumer confidence print rose to 103.6 from 100.9 in June in terms of the headline print. This is fresh highs in the index back to the first half of 2022 (albeit at the margin).

• The relationship between this headline measure and y/y GDP growth is reasonably, see the first chart below. Note we get the advanced Q2 GDP report tomorrow. The market expected a 0.1%q/q read (after a strong 1.3% gain in Q1), which would take y/y growth back to 2.5% versus 3.3% in Q1.
• To be sure, other indicators of domestic demand have not been as encouraging, with retail sales back in negative y/y territory for May.
• This confidence print is also for July, so first month of Q3. In terms of the detail, we saw the domestic economy reading rise to 77 (from 71 in June). Spending plans mostly ticked up or held steady relative to June levels.

Fig 1: South Korean Consumer Sentiment Versus GDP Y/Y

Source: MNI - Market News/Bloomberg

• In terms of the prices outlook, we had a downtick in inflation expectations to 2.9% from 3.0% prior. This is the first sub 3.0% print since the first half of 2022. Arguably though headline CPI has been leading such trends, see the chart below.
• Still, it will provide some comfort to the BoK in terms of the inflation outlook, with a gradual edging down in expectations.

Fig 2: South Korea Consumer Inflation Expectations & CPI Y/Y

Source: MNI - Market News/Bloomberg