South Korean Consumers Become Least Pessimistic in Four Months

By William Sim

Feb. 24 (Bloomberg) -- South Korea’s consumers became the least pessimistic they’ve been in four months in anticipation that interest-rate cuts and the government’s stimulus measures will support the ailing economy.

The sentiment index rose for a second month in February to 85 from 84 in January, the Bank of Korea said in Seoul today. A reading less than 100 indicates pessimists outnumber optimists.

Finance Minister Yoon Jeung Hyun said Feb. 19 the government plans to boost spending by a “significant” amount this year to rejuvenate an economy that’s headed for the first recession since 1998. That would add to the 51 trillion won ($34 billion) already allocated in tax cuts and extra spending to spur local demand as exports slump.

South Korea’s economy shrank the most since the 1997-1998 Asian financial crisis last quarter as the deepening global recession cooled demand for cars, mobile phones and computer chips. Exports, which make up about 60 percent of gross domestic product, tumbled a record 32.8 percent in January.

The central bank reduced the key interest rate to a record-low 2 percent on Feb. 12, extending the most aggressive round of easing since it began setting a policy rate in 1999. Governor Lee Seong Tae said he’s ready for another cut and will seek new ways to revive growth and protect the financial system.

The consumer confidence index is based on a survey of 2,200 households in 56 major cities conducted by mail and telephone from Feb. 11 to Feb. 18.

To contact the reporter on this story: William Sim in Seoul at wsim2@bloomberg.net