Consumers shop for groceries at a supermarket in Seoul, Nov. 20. Yonhap
Negative sentiment about the economy is deepening among consumers and businesses in the face of heightened uncertainties that aggravate the slowdown in Korea's economic growth.
Bank of Korea (BOK) data showed Tuesday that consumer sentiment fell at the steepest pace in more than two years, and separate data from the Federation of Korean Industries (FKI) showed business sentiment has remained pessimistic for nearly three years.
The BOK said the composite consumer sentiment index (CCSI) stood at 100.7 in November, down from the previous month's 101.7.
A reading below 100 means pessimists about economic conditions outnumber optimists.
The decrease this month marked the steepest month-on-month drop since July 2022.
“The worsening CCSI is attributable to concerns over exports and domestic demand in relation to a second Donald Trump presidency,” the BOK said.
It noted the won-dollar exchange rate surged above the psychological threshold of 1,400, and the benchmark KOSPI extended a downturn after Trump was reelected in the Nov. 5 presidential election.
Trump has been prioritizing broader “America First” policies in economic and industrial sectors, including a blanket tariff of up to 20 percent on imports.
Trump also wants to tackle chronic U.S. trade deficit, making Korea a target as it ranked higher over the years on the list of countries where the U.S. is seeing a huge trade deficit.
Korea was ranked 14th in 2021, but climbed to ninth in 2022, eighth in 2023 and is currently sixth in the first half of 2024.
Under the circumstances, the FKI, a major business lobby group, said the business survey index (BSI) for the country's top 600 companies was measured at 97.3 for December.
A reading below 100 also means pessimists outnumber optimists.
The index has remained below 100 for 33 consecutive months since April 2022, on par with the longest streak of 33 months between June 2018 and February 2021, according to the FKI.
In particular, the BSI for the manufacturing industry came to 89.9 for December, while that for the nonmanufacturing industry stood at 105.1.
“Considering that the manufacturing sector makes up a significant portion of Korean industries, the finding is worrisome,” the federation said.
Among sectors in the manufacturing category, only automobiles and other transportation equipment showed positive outlooks.
In the nonmanufacturing category, the information and communication sector and the construction sector were projected to experience downturns.
In the meantime, other indices reflected concerns over the economic growth outlook, which has been revised down by financial institutions here and abroad.
The BOK said the interest outlook index rose to 93 in November, up five points from a month earlier, indicating that more people expect interest rates to rise in the months to come.
The home price index continued to fall for the second straight month in November to 109, showing that those betting that home prices will decline over the next year have increased.