Incomes see growth but Korea’s spending is flat

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Incomes see growth but Korea’s spending is flat

Despite a slight increase in household income in the first quarter of this year, growth in expenditures was flat as an empty wallet.

According to a report by Statistics Korea and the Ministry of Strategy and Finance on Friday, the average monthly income of Korean households stood at 4.51 million won in the first three months of the year, up 2.6 percent from the same period last year.

Compared to the final quarter of 2014, the figure rose 2.4 percent. Adjusted for inflation, the real income growth was 2 percent.

The Finance Ministry said the growth was largely thanks to an increased number of employed Koreans and pay rises during the first quarter. The amount of earned incomes climbed 3.8 percent, the data showed.

Incomes from national pensions showed a 10.4 percent increase, also contributing to the overall income growth.

The number of newly employed people hovered above 300,000 from January through March, keeping a steady growth trend.

“The main contributor was the 3.8 percent increase in earned incomes, which is a major factor for measuring household income growth,” said Joo Hwan-wook, director at the economic policy bureau at the ministry.

But average monthly expenditure was 3.5 million won, up only 0.2 percent during the period. Due to low oil prices, living costs turned out to have been reduced, according to the data.

Consumption expenditure was 2.65 million won, a similar level with the first quarter of last year. Non-consumption expenditures such as taxes and pensions stood at 849,000 won, up 1 percent on-year.

The data showed spending on housing, utility bills and food expanded, while that on transportation, telecommunication and clothing fell.

The average propensity to consume, indicating the percentage of consumption to income, was 72.3 percent, down 2.1 percent from the first quarter of 2014. That was the lowest quarterly figure since 2003.

“The data can be interpreted as meaning spending has not kept pace with earnings because of factors like an aging population and rising debt repayments,” said Seo Woon-joo, director at the welfare statistics division at Statists Korea.

But when excluding the drop in expenditures of oil-related costs, expenditures are considered to have risen 0.8 percent.

Although people showed less willingness to spend, the average disposable income recorded 3.66 million won per household, up 3 percent year-on-year.

The quarterly household surplus posted 1.01 million won, exceeding 1 million for the first time.

For 2014, the country’s Gini coefficient, an indicator measuring income inequality, stood at 0.302, unchanged from the year before, the report said.

Various institutions including the Bank of Korea have been lowering their outlook for GDP growth for the year as consumer spending stays flat.

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