South Korean households' consumption fell in the third quarter of 2012 from a year earlier, data showed Tuesday, apparently as the country's rising household debts gave limited leeway in their spending.
Local households with more than two members saw their consumption-to-income ratio reach 59.6 percent in the third quarter, down 3.13 percentage points from a year earlier, according to the data by Statistics Korea.
The number marks the lowest rate since the agency started to compile such data in 2003. The figure reached 61.2 percent in the fourth quarter of 2008, when the global financial crisis weighed down on local households.
The country's savings rates, however, moved down 1.1 percentage point to 30.1 percent over the cited period, which implies the fall in the consumption is attributable to the country's rising household debts.
South Korea's household debt stood at 937.5 trillion won ($856.6 billion) as of the end of September last year, tantamount to more than 70 percent of the country's gross domestic product for 2011.
Households' interest payment also amounted to around 19.4 trillion won in the January-September period of 2012, up from 19.1 trillion won a year earlier, marking the largest amount since 2008, the Bank of Korea said.
Market watchers said the fall in domestic consumption may come as a major drag to local companies as they already suffer from prolonged volatility in the foreign exchange market caused by a weak yen.
A relatively stronger won inflicts foreign exchange losses on local exporters, making South Korean goods more expensive overseas and damaging firms that compete with Japanese firms.
In 2012 alone, the local currency appreciated about 19 percent against the yen compared with the previous year. The greenback serves as the benchmark for the won-yen cross rate.
Market watchers said the government should tackle the country's falling asset market to bolster the spending activities of debt-ridden households in South Korea, dubbed as "house poor."
House poor largely refers to borrowers who had heavily taken out mortgage lending during the housing boom amid the long-held belief that investment in property never fails but now face repayment burdens due to falling prices. (Yonhap News)
