(Bloomberg) — South Korea’s consumer confidence strengthened in January, rebounding from a drop the previous month as the economy continues to recover, suggesting shoppers are looking beyond omicron concerns after repeated virus waves.
The consumer sentiment index rose to 104.4 in January from 103.9 the previous month. The gauge slid in December as the government tightened distancing rules at the height of renewed pandemic woes, though it remained above the 100-threshold that separates optimism from pessimism.
Following data showing the economy growing at a faster pace and improvements in exports and jobs, the strength in consumer sentiment adds to signs that a recovery from the pandemic is on track.
The survey also suggests consumers were not spooked by the Bank of Korea’s third rate hike since August. The central bank raised borrowing costs earlier this month to 1.25% and signaled the likelihood of further rate hikes.
An index measuring consumers’ outlook for interest rates rose to 139, the highest on data back to July 2008, as more people expect rates to go up rather than down. Households’ inflation expectations for the next 12 months were steady at 2.6%.
While the government’s 14 trillion won extra budget bill wasn’t announced until after the survey was carried out, earlier speculation that extra spending was in the pipeline may also have supported sentiment. The supplementary budget is aimed at helping smaller businesses get through the latest virus wave.
Still, the overall January reading remains well below last year’s peak of 110.3 in June.
The outlook for Korea’s economy remains uncertain amid the latest virus wave and infections have continued to rise since the survey was concluded on Jan. 18. Omicron fueled another record in daily cases on Wednesday.
Developments in the run-up to the presidential election in early March could also influence consumers’ mood over the coming weeks.
(Adds more detail on interest rate expectations, latest virus cases)
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