Korea consumer confidence hits five-month low

Bank of Korea had cut interest rates and released US$7bn in stimulus but Koreans remained unhappy.

According to BBVA Research, Korea's consumer confidence shows decline prior to release of 2Q GDP data. Consumer confidence in July fell to a five month low, signaling that the outlook for Korea’s economy remains under pressure.

Here's more from BBVA:

Policymakers have been stepping up measures to boost the economy recently, with the Bank of Korea cutting interest rates for the first time since 2009 on July 12th, and the government announcing US$7bn in stimulus at the end of June. Tomorrow Korea will announce its second quarter GDP outturn, where we expect to see a further moderation in growth from the first quarter. 

Being heavily export-dependent, Korea’s economy is highly exposed to weakening external demand. With the economy slowing and inflation (2.2% y/y in June) remaining well within the official 2-4% target range, the Bank of Korea cut interest rates on July 12th by 25bps, the first easing move since 2009. 

The move came against weakening external demand, which resulted in a half percentage point lowering of the BoK’s full year forecast to 3.0% y/y (BBVA: 2.9% y/y). We expect a further slowdown in Korea’s second quarter GDP. Given recent fiscal stimulus measures and the likelihood of another rate cut during the year, we expect Q2 to reflect a bottoming out of growth momentum, although there are downside risks due to the weak external environment.