Wed, Feb 13, 2008 - Page 11 News List

Consumer confidence up in S Korea

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South Korea's consumer confidence rose last month to the highest in more than five years, an indication that households may increase spending and drive economic growth.

The sentiment index advanced to 105.9 from 104 in December, the National Statistical Office said yesterday in Gwacheon. A reading higher than 100 signals optimists outnumber pessimists.

The lowest jobless rate in five years and wage gains are encouraging consumers to buy more cars, clothes and luxury goods even as fuel costs climb. The government forecasts domestic demand will account for 90 percent of an estimated 4.8 percent economic growth rate this year as exports cool.

"It's good news that consumers don't seem very concerned about high oil prices and a possible US recession," said Go You-sun, an economist at Daewoo Securities Co in Seoul. "The economy is still on track with strong exports and consumer confidence."

The sentiment index was at the highest level since September 2002, the statistics bureau said.

The benchmark KOSPI index rose 0.6 percent to 1,649.88. The yield on the benchmark five-year government bond fell 1 basis point to 5.18 percent.

South Korea's economic growth accelerated to 1.5 percent last quarter from the third quarter's 1.3 percent pace, driven by the biggest increase in exports in four years and a pickup in corporate investment.

South Korean Finance Minister Kwon Okyu said last month that rising oil costs and the US housing slump posed risks to the economy's expansion. As exports slow, the nation will be increasingly reliant on corporate and consumer spending to extend its longest economic expansion in more than 15 years.

President-elect Lee Myung-bak, whose five-year term begins on Feb. 25, aims to boost economic growth by easing regulations to encourage companies to invest and hire more workers.

Lee won the Dec. 19 election after pledging to increase annual economic growth to 7 percent from about 5 percent now and to double per capita income to US$40,000 by 2017.

"The index seems to have risen as people have high expectations for the new government," said Kim Young-noh, an official at the statistics office.

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