The Bank of Korea is likely to delay its interest rate increase until October rather than August, according to analysis of July consumer sentiment data by Barclays economist Son Beom-ki. The assessment is based on the central bank's recently released Consumer Survey Index (CSI) for July, which shows minimal signs that nominal GDP growth or real GDI growth is translating into household income and consumption increases, while inflation expectations have stabilized. Son noted that although consumer sentiment improved slightly, household spending did not increase, and the improvement was concentrated among high-income households and the Seoul metropolitan area.
Consumer Spending Shows No Growth Despite Sentiment Improvement
The July CSI data reveals a disconnect between sentiment and actual spending behavior. "Consumer sentiment improved slightly, but household spending did not increase," Son stated. "Moreover, the improvement was concentrated in high-income households and the Seoul metropolitan area." This pattern contradicts the Bank of Korea's ongoing expectation that rising GDI would lead to increased household income and consumption, thereby pushing up core inflation.
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Source: Barclays
Inflation Expectations Decline Across Multiple Time Horizons
Consumer inflation expectations showed downward movement across multiple timeframes in the July survey. The expected inflation rate for the next one year fell to 2.7%, down 0.1 percentage point from the previous month. The three-year expected inflation rate also declined 0.1 percentage point to 2.6%, while the five-year expected inflation rate remained unchanged at 2.6%. Son noted that the survey was conducted between July 13-21, before the recent rebound in international oil prices. However, he added that "Korea's petroleum price cap system is likely to keep retail fuel prices stable, and upside risks to inflation expectations will be limited."
Stock Market Correction Reduces Household Assets by 800 Trillion Won
The recent KOSPI index correction has resulted in an estimated 800 trillion won decline in household assets, according to the analysis. This asset reduction raises the possibility of further weakening in consumer sentiment beyond what was captured in the July survey data.
![Barclays data visualization]()
Source: Barclays
FAQ
What did the Bank of Korea's July consumer sentiment data show?
The July Consumer Survey Index (CSI) showed that consumer sentiment improved slightly, but household spending did not increase. The improvement was concentrated among high-income households and the Seoul metropolitan area, with minimal signs that GDP or GDI growth is translating into broader consumption increases.
Why does Barclays expect the Bank of Korea to delay rate hikes until October?
Barclays economist Son Beom-ki cited the weak transmission from economic growth to household consumption, stabilized inflation expectations (with one-year expected inflation at 2.7%, down 0.1 percentage point), and the recent 800 trillion won decline in household assets due to stock market corrections as reasons for expecting the central bank to postpone tightening from August to October.
