Ratio of deficit households hits record low amid slump

Published : Oct 24, 2016 - 09:29 Updated : Oct 24, 2016 - 16:01

A record low number of South Korean households ran a deficit in the second quarter, government data showed Monday, in an apparent sign consumers are tightening their belts amid a long-running economic slump.

According to Statistics Korea, 20 percent of households sustained a deficit from April to June, the lowest reading since 2003, when the agency began compiling related data.

This file photo, taken on Aug. 19, 2016, shows a Statistics Korea official giving a briefing on households' income and spending for the second quarter at the agency's office in Sejong. (Yonhap)

It broke the previous record set in the third quarter of 2015, when 20.3 percent surveyed said their expenditures surpassed disposable income.

Household disposable income refers to the amount of income left available for spending and savings after taxes, pension installments and interest payments are excluded.

The ratio of households in deficit, whose expenditures surpassed their disposable income, had been on a gradual decline since reaching an all-time high of 31.4 percent in the first quarter of 2005.

The figure tumbled to the low 20 percent range in 2012 after hovering in the upper 20 percent band for years.

Some analysts said the fall in the ratio of households in deficit can be construed as a positive indication that most households don't rely on debt to finance their spending.

But most pointed out that households are tightening their purse strings out of concern over the prolonged weakness of Asia's fourth-largest economy.

"The drop means that more households are in the black as they are reluctant to spend due to the protracted economic slump," said Lee Hee-jung, a researcher at the Hyundai Research Institute.

"Despite government measures to boost consumption, households remain jittery over the future performance of the economy."

Gripped by falling exports and anemic consumer spending, South Korea's economic growth remains sluggish. Overseas shipments fell 5.9 percent on-year in September due mainly to weak demand for cars and mobile devices. (Yonhap)