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Keywords
Consumer sentiment, job market, employment, corporate investment recovery
MAIN SURVEY
The Consumer Sentiment Index (CSI),1 a quarterly report compiled by Samsung Economic Research Institute, posted a value of 52.2 in the third quarter of 2010. This marked the fifth consecutive quarterly figure above the benchmark 50, suggesting that consumer sentiment is sound overall. However, the index fell 0.5 points from 52.7 in the previous quarter, reversing an upward trend. The decline was likely due to the housing market downturn and domestic price instability, as well as unfavorable external developments like the global growth slowdown caused by potential slowdowns in China and the US.
The drop in the CSI was largely due to declines in its future-related indices. The "Future Standard of Living Index" and "Future Economic Conditions Index" declined 1.2 points and 1.7 points from the previous quarter, respectively. Both indices fell by a larger degree than the 0.5-point drop in overall CSI. The decline in future-related indices reflected uncertainties over the status of the ftiture economic recovery. Continuous declines in composite leading indicators released by Statistics Korea, which predict future economic conditions, also suggested the less than robust outlook. At the same time, there were much smaller declines in the "Current Standard of Living Index" and the "Current Economic Conditions Index," which fell 0.4 point and 0.5 point from the previous quarter, respectively, to 47.4 and 46.9. In addition, the "Durable Goods Purchases Sentiment Index" rose 1.3 points from the previous quarter, indicating that predictions of fading consumer sentiment are still premature.
Among the income groups, higher earners were hit relatively harder. The CSI for those in the top fifth, fourth, and third quintiles fell 2.1 points, 1.1 points, and 1.3 points from the previous quarter, respectively, accounting for most of the decline in the overall CSI. This indicates that the higher income group, which owns more real estate, felt a stronger pinch from sluggish housing markets. On the other hand, the CSI for those in the first and second quintiles increased 1.2 points and 0.4 point from the previous quarter respectively. In general, however, CSI for all income brackets stayed above the benchmark of 50. This suggests that overall consumer sentiment remains relatively sound.
Vague Expectations For Economic Recovery
The...