The Bank of Korea's consumer sentiment index, which measures sentiment in six categories, fell to 81 in December, its lowest since the last quarter of 1998 when it touched 80.

A reading below 100 indicates most consumers are pessimistic. In November, the reading was 84.

The latest data indicated South Korean households turned more pessimistic about the economic outlook and planned to cut back on spending. South Koreans even planned to cut back on children's education, an area that had been seen as less vulnerable to economic cycles.

'In particular, the number of consumers planning to reduce expenditures on durable goods, clothes and travel increased sharply. The index for spending on education also fell below 100,' the Bank of Korea said in a statement.

The index had been compiled quarterly before the central bank started producing it on a monthly basis from September to better reflect the rapid changes in economic conditions. It surveyed 2,200 households in 56 cities between Dec 12 - 19.

Consumer sentiment towards the interest rates outlook edged up to 93 in December from 92 a month before, snapping the four consecutive months of falls and suggesting more South Koreans expect interest rates to turn higher. -- REUTERS