Persistent economic uncertainties in Europe may be putting a brake on Korean consumer spending as car and department store sales tumble, data showed Sunday.
Combined revenues of three major department stores slipped 1.1 percent last month from a year ago, the first drop since February 2009, according to the Finance Ministry.
Their year-on-year sales growth slowed from 8.3 percent in August to 6.5 percent in September, then to 3.1 percent in October.
Sales of discount stores remained flat last month after fluctuations over the previous few months.
Despite robust overseas expansion, carmakers led by Hyundai Motor, saw their sales plunge 12.7 percent in November from a year earlier, marking a second straight monthly decline.
Last week, a separate report by the Bank of Korea showed that consumer spending hit a two-year low in the third quarter of this year with a mere 2 percent on-year growth.
The sagging consumer sentiment has dampened the growth of credit card expenditure, which has fallen at a steady pace to 14.5 percent last month on-year from nearly 20 percent in August. The reduction could also be ascribed to financial regulators’ crackdown on reckless issuance and illegitimate marketing activities to rein in household debt.
Such downbeat data poses further risks to the already slowing fourth-largest economy in Asia, which has led many agencies and economists to scale back growth estimates to as low as 3.5 percent for next year.
“Domestic consumption seems to have been squeezed by internal and external uncertainties including the European fiscal meltdown,” a ministry official said.
Local retailers are bracing for yet another tough year amid dwindling consumer confidence and tightening regulations on commission charges, despite an online shopping boom.
Lotte, the country’s largest retail group, said it plans to slash budgets for marketing and advertising next year.
Shinsegae Department Store, which also runs the E-Mart supermarket chain, has also drawn up programs, it said would help cut marketing costs by up to 30 percent.
According to the Shinsegae Retail Research Institute, the domestic retail market will expand nearly 7 percent on-year to 232 trillion won ($202.4 billion) next year but weaken from this year’s estimated 8.2 percent.
By Shin Hyon-hee (
heeshin@heraldcorp.com)
