Confidence among South Korean consumers fell to the lowest in almost eight years, fueling concerns about the so-called “consumption cliff” that refers to an abrupt drop in private consumption, central bank data showed on Tuesday.
The composite consumer sentiment index (CCSI) stood at 94.2 in December, down 1.6 points from the previous month, according to the Bank of Korea (BOK).
The figure marked the lowest since the global financial crisis was in full swing in April 2009. The reading below 100 means pessimists outnumbered optimists. It was based on a survey of 2,050 households nationwide.
After rising from 101.7 in September to 101.9 in October, the index declined to 95.8 in November.
The decline came as political uncertainty escalated following the scandal involving President Park Geun-hye that led to the presidential impeachment on Dec. 9.
Prime Minister Hwang Kyo-ahn will temporarily assume presidential power until the constitutional court rules on it for as long as 180 days. The power vacuum stoked worries about the absence of economic control tower.
The U.S. Federal Reserve raised interest rates by a quarter percentage point in December, indicating three more hikes in 2017.
The Fed’s rate increases would put further pressure on the BOK to lift borrowing costs amid the record-breaking household debts. The BOK cut its policy rate from 3.25 percent in July 2014 to an all-time low of 1.25 percent in June this year.
Inflation expectations, which reflect outlook among consumers for the headline inflation in the next 12 months, stood at 2.5 percent in December, unchanged from the previous month. Enditem