South Korea’s consumer confidence hits four-month high on chip boom

SOUTH Korea’s consumer confidence climbed for a third straight month in July as an artificial intelligence-driven semiconductor boom and expectations for stronger wage growth offset concerns over elevated inflation and recent stock-market losses.

The composite consumer sentiment index edged up to 106.8 in July to the highest level since March, the Bank of Korea said on Tuesday (Jul 28).

The reading remained well above the neutral 100 threshold, indicating households are broadly optimistic.

The central bank said robust chip-related exports and investment together with expectations for higher wages underpinned sentiment even as households reported weaker current living conditions amid persistent inflation and a decline in share prices.

The index measuring households’ current living standards fell one point to 93 from the previous month, while expectations for household income rose to 101.

Consumers’ outlook for the economy was unchanged at 92, remaining above the gauge’s long-term average as strength in the chip industry offset concerns over heightened geopolitical tensions in the Middle East, the BOK said in a statement. 

Housing sentiment improved further, with expectations for home prices rising to the highest level since September 2021 as apartment prices continued to climb in the capital region.

One-year inflation expectations eased to 2.7 per cent from 2.8 per cent as domestic fuel prices dropped and pressure from the won’s earlier depreciation moderated.

The figures add to signs that households remain optimistic about the economy even as higher living costs continue to weigh on perceptions of current conditions.

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South Korea’s economy expanded 0.6 per cent in the second quarter, beating economists’ estimates as AI-related demand boosted chip production and exports.

The stronger-than-expected growth and higher consumer prices have reinforced expectations that the BOK could raise its policy rates again by October, with some economists seeing a move as early as its Aug 27 meeting. BLOOMBERG