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South Korea April Consumer Sentiment at 1-Year High

South Korean consumer confidence returned to pre-crisis levels in April, central bank data showed on Tuesday, bolstering views that the economy and rates had bottomed.

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CNBC.com
Korea, Korean Flag

Sentiment in April jumped by a record margin to its highest in over a year as the economy averted a recession on massive government spending and unprecedented rate cuts, the data showed.

"The pace is of recovery is surprisingly fast," said June Park, an economist at Woori Investment & Securities. "It's now apparent that the economy has passed the worst and there will be no more rate cuts down the road. But the recovery will be very slow and we won't hear talk of tightening until late this year," Park said.

The Bank of Korea's consumer sentiment index, which measures sentiment in six categories, soared to 98 in April, the highest level since the second quarter of 2008, from 84 in March.

The central bank began to provide monthly consumer confidence data in July 2008.

A reading below the benchmark of 100 indicates consumers are more pessimistic about economic conditions.

"Consumer sentiment surged significantly nearly to the benchmark level in April amid growing views that the worst of the economic crisis is over," said Jun Sung-bum, an analyst at the central bank. "Given the time gap, actual consumer spending will likely increase in three to four months."

The central bank said in the release that the current account swinging to a surplus and a recent stock market rally reduced concerns about a deep economic downturn.

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The nation's current account posted the biggest surplus in 11 years for February and Seoul shares have recovered about 20 percent this year after losing some 24 percent last year in the wake of the Lehman Brothers collapse in September.

The government has offered stimulus packages worth about 70 trillion won ($52.16 billion) and the central bank has since early October cut its base rate by a total of 3.25 percentage points to a record low of 2.00 percent.

Separately, the official data showed the index on the economic outlook over the next six months climbed to 100 in April from 64 in March, the best level since the third quarter of 2007, indicating many South Koreans had turned more optimistic about a recovery.

The central bank polled 2,200 households in 56 cities around the country between April 14 and April 21 for the data.

The Bank of Korea next reviews rates on May 12 after pausing its rate-cutting cycle both in March and April.