Households spending less than W1m monthly surge

The proportion of households spending less than 1 million won ($843) per month has spiked in the third quarter amid worsening economic conditions in South Korea, government data showed Monday.

According to data by Statistics Korea, the proportion of households with monthly spending of less than 1 million won rose to 13 percent in the third quarter, the highest level among third-quarter figures since 14 percent in 2009.

The proportion of such low-spending households has been hovering around 8-11 percent in recent years after surging up to 13-14 percent in the wake of the 2008 global financial crisis.

With increased economic uncertainties this year, the figure rose again to a 13 percent level.

Those spending less than 2 million won per month also increased in the same quarter, while those with monthly spending 2-4 million won shrank.

The proportion of households with more than 4 million won of monthly spending has not changed much, staying at around 9 percent.

Reflecting the trend of cutting down on spending, other data by the government showed that household spending on food fell 3.2 percent in the third quarter from a year earlier. It was a fourth consecutive quarterly decline since the fourth quarter last year.

The data comes as major economic think tanks have revised down the 2017 economic growth forecasts to the 2 percent level, with increased downside risks including corporate restructuring, high youth unemployment rate and surging household debt.

Consumer sentiment might worsen in the fourth quarter, as the recent US Fed rate hike and the National Assembly’s passage of the motion to impeach President Park Geun-hye are likely to weigh on the economy, observers said.

The Fed’s rate hike is likely to drive up market interest rates, push borrowers to pay higher interest rates to financial institutions and reduce their disposable income.

Finance Minister Yoo Il-ho earlier said the “psychological downswing” coming from the political uncertainty makes the Korean economy more vulnerable.

To spur domestic demand, the Anti-Corruption & Civil Rights Commission is reviewing whether to temporarily exempt the anti-graft law during national holidays, a local news report said.

By Kim Yoon-mi (yoonmi@heraldcorp.com)