Korean household income up 3%, down 2.8% in real terms

Statistics Korea's Lee Jin-seok, head of the income statistics department, announces third-quarter household income and spending at the government complex in Sejong on Thursday. [YONHAP]

Household incomes grew a nominal 3 percent on year in the third quarter. On an inflation-adjusted basis, they fell 2.8 percent.

Korean consumer inflation is running at over 5 percent.

According to Statistics Korea on Thursday, average household monthly income in the third quarter was 4.87 million won, up 3 percent from the same quarter a year earlier.

Spending rose 6 percent as consumers opened their wallets with the lifting of Covid-19 restrictions. Inflation also drove the growth in spending.

Low wage earners were most affected, with the lowest quintile in terms of income the only group in which incomes declined. For this cohort, incomes were down 1 percent on year.

The monthly average income from labor was 3.11 million won, up 5.4 percent, while business income in the third quarter was 991,000 won, up 12 percent on year. Transfer income, which includes government subsidies, was 652,000 won, down 18.8 percent.

Within the transfer income category, income subsidized by the government dropped 26.1 percent.

Last year, most people received 250,000 won in the third quarter, said Lee Jin-seok, head of the statistics agency’s income statistics department. “As that effect is gone, public transfer income dropped sharply."

Those with the lowest incomes were disproportionately affected.

Average household spending was 2.7 million won per month, up 6.2 percent. Inflation adjusted, actual spending rose 0.3 percent.

Spending at restaurants and hotels rose 22.9 percent year-on-year. Entertainment and culture spending increased 27.9 percent. Transportation spending rose 8.6 percent.

But spending on groceries, including non-alcoholic beverages, dropped 5.4 percent. Spending on home products and household services fell 9.1 percent.

Non-consumer goods spending, including taxes and utility bills, grew 6.6 percent on year to 1 million won. This is the first time in which household average monthly spending on non-consumer goods has exceeded 1 million won.

Interest payments rose dramatically as the base rate was much higher in the third quarter this year than last year. Household interest payments rose 19.9 percent year-on-year. This is the sharpest year-on-year increase since the fourth quarter of 2018.

The Bank of Korea has been raising rates steadily since August last year. From a historic low of 0.5 percent, the base rate has been lifted to 3 percent.

Another rate setting meeting, the last of the year, is set for this month, and the market is split on whether the base rate will be increased a quarter of a half point.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]