Real income shrinks in Q2

Koreans saw their income shrink in the second quarter of 2016, the first contraction in seven quarters, Bank of Korea data showed Friday.

The country’s real gross national income for the three months that ended June 30 fell 0.4 percent from the previous quarter, when the figure rose 3.4 percent on-quarter. 

The real GNI, as it reflects price changes, is widely used as a gauge of a country’s purchasing power.

Deterioration in trading terms is cited as the key reason behind the decreased income.

“Prices of automobiles and chips fell while oil and natural gas prices inched up,” BOK’s Kim Hwa-yong explained.

Semiconductor chips and cars are some of Korea’s top export items, while the country imports oil, gas and other natural resources to produce them.

Prices of Dubai crude, Korea’s benchmark oil, rose to an average of $43 per barrel in the second quarter from $30.80 a quarter earlier, the BOK data shows.

An increase in dividend payouts to foreign holders of Korean stocks also attributed to the decreased national income, the official added.

This is the first time since the third quarter of 2014 that Korea registered a quarter-to-quarter drop in the inflation-adjusted GNI. In the Q3 of 2014, the figure had dipped 1.7 percent.

On an on-year basis, the latest real GNI figure represents a 4.5 percent gain, but this is again the smallest increase the country has logged in the past six quarters.

Friday’s data, however, did provide some positive news for the Asia’s fourth-largest economy struggling to eke out higher growth despite its main locomotive -- exports -- weakening.

The growth in gross domestic product in the April-June period is revised up to 0.8 percent, from the initially projected 0.7 percent. This represents an accelerated pace of growth from the first quarter’s 0.5 percent on-quarter gain.

Compared to a year earlier, the GDP expanded 3.3 percent, the most since the third quarter of 2014 when the gain was 3.4 percent, the BOK said.

Korea’s Finance Ministry is aiming for a 2.6 percent growth for the whole of 2016, the target cut in June from 3.1 percent.

To buttress the economy, it has prepared an 11 trillion won ($9.86 billion) fiscal spending plan for the rest of the year, but the supplementary budget bill is locked at the National Assembly amid bipartisan wrangling.

By Lee Sun-young (milaya@heraldcorp.com)