Auspicious signs point to recovery in Korea domestic demand

Comprehensive policies are apparently doing the trick.

There are now more signs that domestic demand is recovering in Korea.

According to a research note from DBS, while July retail sales data is awaiting release, some preliminary information foretells that a consumption recovery is underway.

Department store sales registered 2.0% YoY growth in July, a significant turnaround compared to -1.7% in Apr-Jun. Meanwhile, consumer confidence index edged upward to 107 in August from 105 in July.

The sub-index of current/prospective domestic economic conditions, which dropped the most after the ferry disaster, rose the most by 6-8 points in August.

Here’s more from DBS:

It seems that the government's recent commitment of reviving economic growth via comprehensive policies has produced positive results. At the very least, public sentiment is improving.

In addition to the consumer sentiment survey, the improvement of confidence was also reflected in the rebound of stock market prices. The KOSPI has gained more than 3% since the beginning of July. A stronger recovery is expected ahead.

Thanks to the government's relaxation of mortgage lending rules and the central bank's interest rate cut, the property market is expected to re-enter a cyclical upturn in the coming quarters.

A recovery in the real estate sector should play an important role in driving domestic growth via both consumption and investment.