Incomes rise in Q2 but household spending flat

Korea’s household incomes rose nearly 3 percent in the second quarter but their expenditures rose only 1 percent, signaling a freeze in consumption in the domestic market, government data showed Friday.The nominal average monthly income of households stood at 4.27 million won ($3,579), rising 2.9 percent from the same quarter in 2014.The growth was driven by hikes in pensions or insurance paid by the government or corporate sector, which rose by 15.2 percent year-on-year.In particular, the government-paid basic monthly pension, a maximum of 200,000 won given to Koreans aged 65 and older in the bottom 70 percent bracket that started last July, boosted overall household incomes, data showed.Despite the average increase in incomes, the average Korean household didn’t spend much more than a year earlier. Average household expenditure stood at 3.28 million won each month in the second quarter, rising 1 percent only from the same period in 2014.Spending on goods and services grew only 0.7 percent on a yearly basis, despite the doubled prices of cigarettes and rising monthly rent payments. Shrinking consumption was particularly clear in the entertainment and cultural sectors due to the outbreak of Middle East respiratory syndrome (MERS).While spending less on daily necessities and leisure, Koreans saved more or invested in real estate. Expenditures on pension payments, insurance, savings, taxes and interest on loans rose 2 percent, mainly due to the hike in property acquisition taxes with the rise in real estate transactions.The so-called Average Consumption Tendency, an index of the ratio of household consumption compared to disposable incomes, stood at 71.6 percent, the lowest since the second quarter of 1998, when Korea was hit by the 1997 Asian financial crisis.BY KIM HEE-JIN [kim.heejin@joongang.co.kr]