Spending drops most on record as pessimism risesLast year, household spending dropped the most since the statistics were first compiled in 2006, with declines particularly sharp among people at lower and middle income levels.
Yet restraint was evident across the board, with even the wealthy watching their budgets.
It is the exact opposite of what the Moon Jae-in administration has been trying to achieve with its income-led growth policies. The plan was to drive up the incomes of the poorest in order to stimulate demand and drive spending.
The average monthly spending of households totaled 2.53 million won ($2,180), down from 2.56 million won. When adjusted for inflation, household spending declined 2.2 percent.
Statistics Korea said disappointing job figures have led to households cutting back on their spending.
“Since more than two-thirds of households are people whose incomes are primarily labor wages, the job situation seemed to have had an influence,” said Park Sang-young, welfare statistics director at Statistics Korea.
The outlook is not good, and spending could worsen in the challenging economic environment.
The spending report came out the same day that the central bank announced that the economy grew in the first quarter at the slowest pace in 10 years.
The study found that the only households that increased spending were those with monthly incomes of between 5 million won and 6 million won, while all other groups were cutting back. Households making 5 million won to 6 million won are 9.6 percent of the total, which means 90.4 percent of households have been tightening their belts.
Spending declined 4.8 percent for households making between 4 million won and 5 million won. The same decline was reported for households making between 1 million won and 2 million won per month.
Those earning less than 1 million won a month spent 0.9 percent less in 2018 than in 2017. On average, they spent more than they made, with the total at 1.09 million per month.
Households making less than 2 million won account for 30 percent of all households. Households making less than 1 million won are 16.6 percent of the total.
Even those in the top group, making more than 7 million won a month, cut back on spending. For them, it declined 2.3 percent. Those making 6 million won to 7 million won a month spent 1.7 percent less in 2018.
The gap between the rich and poor comes out in the report. On average, those in the lowest 20 percent category spent 1.15 million won a month, while those in the top 20 percent spent 4.28 million won
The study found that while food and beverages - daily necessities - accounted the most of spending among those with the lowest incomes, the rich spent largely on transportation, high-end cars and education.
Last year, overall spending fell for education, which declined 7.9 percent, and transportation, which was down 5.5 percent. Spending on entertainment and culture was up 9.8 percent, while spending on health increased 5.1 percent.
“Culture and entertainment spending were up because the number of people traveling abroad increased, while expenditure on health is affected by the aging population,” said the statistics agency’s director Park.
Spending for people 60 years old or older increased 2.7 percent, as there are more older people in need medical attention. The only other age group that increased monthly spending was the 40- to 50-year-old category, where the total inched up 0.8 percent. This is the age group that spends largely on supporting their families, including tuition expenses for their children.
But the people in this age group are the biggest victims of the unfavorable job market, as the number of people in their 40s employed continues to decline.
BY LEE HO-JEONG [firstname.lastname@example.org]