Should old accounting be forgot: End of year one to forget for businesses as spending slumps

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Should old accounting be forgot: End of year one to forget for businesses as spending slumps

Published: 31 Dec. 2024, 19:34 Updated: 01 Jan. 2025, 13:48

KIM JU-YEON
[email protected]

Audio report: written by reporters, read by AI

Restaurants stand empty in a street in Jongno District, central Seoul on Dec. 31, 2024. Consumer sentiment has been dampened by political uncertainty, while a tragic plane crash weighs heavily on the entire nation, leading to many year-end and new year festivities being cancelled. [YONHAP]

The end and beginning of a year is typically a good season for businesses. The long period marked by public holidays, work parties and overall festive cheer normally has people meeting their loved ones at restaurants, going to markets and spending at stores.

There has been no such uptick for Korea in the last month of 2024. Consumer sentiment has been dampened by political uncertainty, while a tragic plane crash weighs heavily on the entire nation. The prospect of New Year festivities-related spending in 2025 is also bleak.

“It’s the end of December, and yet it doesn’t feel like the year-end festive season at all,” said an owner of a barbecue restaurant in Dodam-dong, one of the busiest neighborhoods in Sejong, to the JoongAng Ilbo, an affiliate of the Korea JoongAng Daily.

“I sometimes just close shop at 10 p.m. since customers are scarce,” the shop owner, who asked to be identified only by their surname Kim, said. Many barbecue places in metropolitan areas in Korea operate close to or past midnight.

A worker from a Chinese restaurant in Gwanghwamun, central Seoul, that hosts many group meetings, said the shop has seen a lot of cancellations for year-end parties in December. Some teams canceled their New Year parties because of the Jeju Air crash, the worker added.

The country entered a weeklong mourning period from Sunday to remember the 179 people killed in the plane crash that day. Local governments, especially those of Gwangju and South Jeolla, where the majority of the victims hailed from, canceled year-end and New Year festivals, including annually held events where people gather to see the sunrise. Other regional governments also followed, such as Busan, Ulsan and Wonju.

Officials remove a stage initially set up for the annual ringing of the bell to bring in the new year at the National Debt Redemption Movement Memorial Park in Daegu on Dec. 31 after Korea entered a weeklong mourning period from Dec. 29. [NEWS1]

The Jeju Air tragedy comes at a time when domestic spending had already taken a hit. Political turmoil following President Yoon Suk Yeol’s martial law declaration on Dec. 3, including two impeachment votes that changed state heads, heavily reduced spending. Credit and debit card spending for year-end dinners, considered a peak time for sales for self-employed businesses, dropped notably.

At Yeouido, western Seoul, where the National Assembly is located, shops logged higher weekly revenue in December compared to last year, according to Korea Credit Data on Monday. Revenue in the first, second and third week was higher by 3.03 percent, 11.67 percent and 2.14 percent, respectively, compared to the same time period in 2023. The second week especially saw an increase in sales as large demonstrations were carried out in front of the National Assembly to advocate for President Yoon’s impeachment.

But unlike daytime, nighttime spending dropped on year by 0.42 percent, 2.75 percent and 4.09 percent, respectively, for those weeks.

This was a pattern noticed even in other commercial areas not related to the protests.

In the major commercial district of Hongdae in western Seoul, daytime card spending increased for the first three weeks of December, but nighttime spending either fell substantially or remained at levels similar to last year.

This shows how consumer confidence has slumped. The Composite Consumer Sentiment Index (CCSI) was recorded at 88.4 for December, according to the Bank of Korea. The CCSI measures consumer optimism about the economy, and is thought to indicate negative sentiment when it is below 100. The 88.4 logged in December is the lowest since the 86.6 recorded in November 2022 and 12.3 points lower than November this year. This is the largest drop since the index fell by 18.3 points in March 2020 after Covid-19 and regulations aimed at containing the virus swept the nation.

Spending tends to slow down when major disasters occur. This was the case when the Sewol ferry sank in April 2014 and the Itaewon crush happened in October 2022, both leading to mass casualties. Public events and gatherings were also canceled en masse then too, while private firms refrained from holding events.

“It seems that the martial law declaration and impeachment has intensified the tendency to avoid dinner gatherings that started from the Covid-19 pandemic,” said Kang Seong-jin, an economics professor at Korea University.

“The fewer dinner meetings there are, the less people spend, so it is concerning how it could lead to sluggish domestic demand,” Kang said.

BY KIM KI-HWAN, KIM NAM-JUN, KIM JU-YEON [[email protected]]