Household spending grew at slowest pace in 2015

South Korea’s household income grew at the slowest pace in six years in 2015, with spending growth hitting a new record low, government data showed Friday.

Average household monthly income increased 1.6 percent to 4.37 million won ($3,538) last year from a year earlier, said Statistics Korea in a report. It was the slowest growth since 2009 when the figure was 1.2 percent in the aftermath of the global financial crisis.

Household monthly spending, excluding tax and social security-related payments, increased 0.5 percent, the slowest pace on record, to 2.56 million won.

After taking inflation into account, the real household income increased 0.9 percent while spending fell 0.2 percent in price-adjusted real terms.

Despite the government’s efforts to boost domestic consumption and record low levels of bench market rate, Korean households trimmed their expenditure amid economic uncertainty.

Consequently, the average propensity to consume fell 1 percent point year-on-year to 71.9 percent in 2015 which means a household spent 719,000 won when it earned 1 million won per month.

The figure marks the lowest level since the related data has been complied by Statistics Korea in 2003, following constant drops since 2010 when the figure stood at 77.3 percent.

Household spending figures are key indicators of private spending, which accounts for around half of the nation’s gross domestic product.

The report, based on a survey of some 8,700 households in the country, showed that earned income among households rose 1.6 percent while self-employment income declined 1.9 percent for the first time as restaurants and other shops were hit hard by the outbreak of MERS since the first confirmed case in late May last year.

Although consumers tightened their belts to cope with tough economic conditions, the data indicated that spending on housing showed strong growth of 20.8 percent.

“The slowdown of expenditure is largely due to reduction in transportation costs resulting from the fall in oil prices. Cut in expenses for education and communication also contributed,” an official at the Ministry of Strategy and Finance.

By Park Han-na (hnpark@heraldcorp.com)