(Bloomberg) -- South Korea’s consumer confidence tumbled by the most since the onset of the pandemic as households grapple with the fallout from accelerating inflation and rising interest rates.
The consumer sentiment index dropped by 10.4 points to 86 in July, the Bank of Korea said in a statement. The reading had already fallen below the 100 threshold, indicating pessimists outweighed optimists.
The drop in July is the largest since March 2020 when the World Health Organization declared the coronavirus a pandemic. While the global economy has largely rebounded from the crisis, inflation has emerged as one of the key risks, initially triggered by central bank stimulus designed to aid economies during the outbreak.
The Bank of Korea raised its key rate by 50 basis points this month in the largest single increase in its history as it tries to rein in inflation. More tightening is expected in the months ahead, even though the bank is increasingly wary of its impact on the economic outlook.
Korea’s Economy Accelerates, Giving Scope to Keep Raising Rates
Among the components of the headline sentiment index, households’ outlook for the economy fell sharply to 50, the lowest level since the global financial crisis in 2008.
Households’ perception of inflation hit 5.1, the highest on record, while inflation expectations for the next 12 months surged to 4.7, also a record. The outlook for interest rates advanced to 152, the strongest reading ever.
The survey of 2,432 households was conducted July 11-18.
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