Consumers are less willing to spend

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Consumers are less willing to spend

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Due to tiny wage increases, consumers tightened their purse strings even more last year, indicating that the domestic market is still in a sluggish state despite government efforts to boost consumption.

According to a report released by Statistics Korea yesterday, the average propensity to consume was 73.4 percent in 2013, down 0.7 percentage point from a year earlier and the lowest since 2003.

The figure means Koreans spent only about 730,000 won ($681), even if they had 1 million won available.

The government agency said consumption propensity dropped because wage increases were insufficient to encourage consumers to spend more.

Consumption propensity has declined since 2011. In 2012 and 2013, the index fell below the level in 2008 (75.9 percent), when the global financial crisis hit the Korean economy.

Average household monthly income stood at 4.16 million won last year, up just 2.1 percent from a year earlier, the smallest increase since 2009.

Income for salaried employees inched up 2.8 percent, while wages of self-employed people rose 0.4 percent. Because of the depressed real estate market and lower housing prices, income from assets dropped 3 percent.

Households spent an average of 2.48 million won a month in 2013, up 0.9 percent from 2012, the lowest increase since 2004.

Adjusted for inflation, real consumption spending fell 0.4 percent year-on-year, declining for the first time since 2009.

“The decrease in consumption may have been affected by expanded government subsidies for child care programs,” said Seo Un-joo, an official at the statistics agency.

The official added that such a contraction in consumption isn’t always only a negative sign.

BY SONG SU-HYUN [ssh@joongang.co.kr]
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