Indicators improved, but consumer sentiment fell sharply by 4 points
Last month's monthly News Sentiment Index (a gauge reflecting the economic mood conveyed in news coverage) recorded 95.34, down 4.05 points from the previous month and marking its lowest level since March, according to data confirmed on the 3rd via the Bank of Korea's Economic Statistics System. Despite improving economic indicators, the public's perceived economic conditions actually worsened.
The index had bottomed out at 92.88 in March, when the fallout from the Middle East conflict sent international oil prices soaring and the won-dollar exchange rate climbed into the 1,500-won range, shaking financial markets. The index rebounded to 110.64 in April and held steady in the 100–110 range through August, before slipping below the 100 mark to 99.39 in September and accelerating its decline into October.
The News Sentiment Index is calculated by the Bank of Korea by quantifying the sentiment found in economic news articles closely linked to domestic economic activity; a reading above 100 indicates greater optimism than the long-term average. It is regarded as a leading indicator, running one month ahead of the Consumer Sentiment Index (CCSI) and two months ahead of the Business Survey Index (BSI) for manufacturing.
The decline reflects shocks in asset markets. Stock prices slid, led by semiconductor shares, while rising interest rates increased the burden of borrowing costs. The KOSPI fell 16.2% last month, posting the seventh-largest monthly decline on record. According to the Bank of Korea's weighted-average interest rate statistics, the rate on bank mortgage loans last month stood at 4.88% a year, the highest since April 2012 (4.94%)—a span of 14 years and five months.
In mid-October, the International Monetary Fund raised its growth forecast for the Korean economy this year to 3.3%, a 0.7 percentage-point upward revision. The Bank of Korea's flash estimate of third-quarter real GDP growth, released last month, came in at 1.0%, more than triple the projection (0.3%) it had presented in August. Even so, the News Sentiment Index kept falling—a stark contrast to July, when the index stood at 101.83 despite the KOSPI posting its largest drop on record at 22.2%.
A Bank of Korea official explained: "News sentiment in the industrial sector, reflecting the upward growth revision and robust exports, continues to run above the long-term average, but the overall index fell below 100 due to falling stock prices, doubts about AI growth prospects, and the burden of high interest rates." Jeong Yong-taek, an economist at IBK Investment & Securities, analyzed: "The results show that as polarization deepens, the public is not feeling the fruits of growth," adding that "consumer sentiment is unlikely to see a trend-based improvement anytime soon."
