Consumer sentiment improving amid easing domestic uncertainty, Finance Ministry says

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Consumer sentiment improving amid easing domestic uncertainty, Finance Ministry says

Published: 18 Jul. 2025, 15:48 Updated: 18 Jul. 2025, 16:16

Audio report: written by reporters, read by AI

The Ministry of Economy and Finance building in Sejong is seen in this file photo. [YONHAP]

Despite lingering concerns over an economic slowdown, the government has noted encouraging signs in domestic demand, particularly in consumer sentiment.

“The Korean economy continues to face downside pressures amid delayed recovery in private consumption and construction investment, as well as persistent labor market challenges in vulnerable sectors,” the Ministry of Economy and Finance said in the July edition of its monthly economic report released Friday.

“Additionally, deteriorating external conditions such as U.S. tariff impositions have heightened concerns over a slowdown in exports.”

However, the ministry added, “There are also positive signals, such as improving consumer sentiment.”

While the government began referencing “increased downside pressure in the economy” in January, its tone has gradually shifted toward cautious optimism since the new administration took office in June. The June report removed the word “increased,” referring only to “downside pressure,” and this month’s edition added the phrase “positive signals.”

“The domestic uncertainty has largely eased, and consumer sentiment, which had dropped significantly, is steadily recovering,” said a Finance Ministry official. “Given how weak the first-quarter economic growth was — so poor it recorded negative growth — we’re now seeing at least the domestic sector setting the stage for a potential turnaround.”

A key indicator cited in the report was the June Composite Consumer Sentiment Index (CCSI), which rose 6.9 points from the previous month to 108.7. A reading above 100 suggests optimism relative to the long-term average from 2003 to 2024.

A sign at a convenience store in Seoul on July 13 shows information on where to use livelihood recovery consumer coupons. [YONHAP]

The index had dipped below 100 after the imposition of martial law in December last year but finally recovered in May, reaching 101.8. Rising stock prices and expectations for a supplementary budget are believed to have contributed to the improved sentiment.

Still, broader consumption indicators remain weak. Retail sales in May fell 0.2 percent year-on-year, driven by declines in nondurable goods such as clothing.

Uncertainty also persists in the export sector, particularly with U.S. tariffs deferred only until Aug. 1. “While we’ve included ‘positive signals,’ overall economic conditions remain heavily weighed down by downside risks,” the ministry official said. “Export-driven businesses in particular face significant threats.”

Exports in June rose 4.3 percent year-on-year, supported by improving semiconductor conditions and pre-emptive orders ahead of the expected end of mutual tariff suspensions.

The government said it will swiftly implement the 31.8 trillion won ($22.8 billion) supplementary budget and concentrate interagency efforts to ensure that consumer coupons for economic recovery — scheduled for distribution starting July 21 — boost household spending and revitalize local economies.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY AHN HYO-SEONG [[email protected]]