Real income declines for first time in 7 yearsThe real income of Korean households fell for the first time in seven years due to the stagnant economy and ongoing corporate restructuring, raising more concerns about the country’s already weak domestic consumption.
Nominal income for a Korean household, or a family of more than two people, rose 0.6 percent year on year to 4.39 million won ($3,889) on average, but real income fell 0.4 percent from a year ago, the government said Friday. Statistics Korea said the labor market was weak last year and that the wage growth rate was lower than previous years.
“The number of new jobs available in the country has decreased and the wage growth also has slowed,” said Kim Ie-han, a director at the Ministry of Strategy and Finance.
The number of workers increased by 299,900 last year when compared to the previous year, which is far below the 533,000 in 2014 and 337,000 in 2015. The wage growth rate also dropped from 3.9 percent in 2014 to 1.6 percent in 2015. In 2016, it was 1 percent.
As real income has dropped, people have spent less money in the country, where the domestic consumption is already weak, statistics show, and are being blamed for the economic slowdown.
Data showed that a household spent 3.36 million won a month on average, down 0.4 percent from the previous year. This was the first time the figure dropped compared to the previous year since 2003, when the government began compiling data in its current form. When it comes to real household expenditures, it dropped 1.3 percent year on year, and it fell for two consecutive years.
Consumers spent 4.3 percent less on the transportation-related sector. The government explained that fewer consumers purchased vehicles last year and spent less on automobile fuel due to the fall in international crude oil prices. People spent 2.5 percent less on the telecommunications sector as fewer bought new cellphones. During the same period, consumers spent 5.3 percent more on cigarettes and alcohol.
The average propensity to consume, or consumption relative to income, fell 0.9 percentage points from the previous year to 71.1 percent. In the fourth quarter of last year alone, consumption was 69.7 percent, the first time in history that it fell below 70 percent.
The 71.1 percent figure recorded last year means that Koreans spent 711,000 won and saved 1 million won.
Meanwhile, the consumer sentiment index rebounded for the first time in four months but remained weak. The index rose from 93.3 in January to 94.4 this month, the Bank of Korea said Friday. The 93.3 recorded last month was the lowest since March 2009. A reading above 100 points indicates the majority of survey participants have a positive outlook on the national economy, while a reading below 100 indicates a negative view.
BY KIM YOUNG-NAM [firstname.lastname@example.org]