Consumer confidence fell sharply in June, a decline that at a headline level is big enough to suggest that private consumption might not grow in the next 3M. Consumers seem to be most worried about the overall situation, with the most pronounced weakest seen in perceptions of the domestic economy and employment. In contrast, purchase intentions remained firm.
The driver of the weakness in June seems to have been prices; worryingly for the BOK, inflation expectations surged in June, rising 0.6ppts to just under 4%. This, of course, is somewhat backward looking, as consumers react to the rise in inflation that has already happened. Still, it will be a worrying development for the BOK, with the fall in property price expectations in June only providing a little consolation.
With a likely slowdown in consumer spending, the BOK will be watching the cycle more closely. Activity will become a bigger source of concern if this month's business confidence survey also looks shaky. Still, it would need quite a dramatic change in business confidence to make the BOK doveish. Inflation is the much more important issue for the bank for the time being.