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Thursday September 6, 3:20 PMS.Korea econ outlook firms but rates seen on holdSEOUL, Sept 6 (Reuters) - South Korea's economic outlook brightened on Thursday with strong August consumer sentiment and department store sales data, but the central bank is seen keeping interest rates on hold this week amid global market jitters.A key consumer sentiment index rose to its highest in nearly five years in August, department store sales posted accelerating growth last month and the Finance Ministry continued to be optimistic about the country's economic growth. "Stock prices went down, but the market is still up on the year, so consumers sense that the economy is not in any danger and that indicators are improving," said Song Jae-hyeok, an economist at SK Securities. "For now at least, the U.S. subprime problem is viewed by consumers as a rather remote issue, not a Korean one." The data helped reverse gains in September treasury bond futures , which ended down 1 tick at 106.94, while the main stock market rose 1.24 percent. Yet economists said lingering worries about the turbulent global markets and benign local inflation would prompt the Bank of Korea to hold interest rates for a while after raising the overnight call rate target in July and August to 5.0 percent. "Despite higher sentiment data, the central bank will probably leave interest rates steady during this year," said Goh You-sun, an economist at Daewoo Securities. The National Statistical Office said its seasonally adjusted consumer expectation index rose for the fifth consecutive month to 105.6, the highest since touching 107.3 in September 2002. It was at 103.8 in July and 101.2 in June. Consumer optimism was also reflected in Finance Ministry data that showed annual growth in department store sales in August rose to 2.9 percent from a revised 0.2 percent gain in July. Vice Finance Minister Kim Seok-dong told a news conference the local economy's growth was accelerating on brisk exports and growing domestic demand, adding the country would achieve this year's growth target set at around 4.5 percent. Also, the state-run Korea Development Bank said earlier that its survey showed a majority of local companies expected their business conditions to improve in the fourth quarter from the third, remaining optimistic for the third consecutive quarter. Its business sentiment index for local companies edged down to 104 for the fourth quarter from 105 for the current quarter, when the index was at its highest since the second quarter of last year, the bank said in a statement. Still, a reading above 100 means the majority of companies expect business to improve in the next quarter. Separate central bank data, also released on Thursday, showed growth in lending by commercial banks to households picked up to 1 percent in August after a 0.5 percent gain in July. (Additional reporting by Lee Jin-joo and Cheon Jong-woo) |
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