SEOUL, Apr. 19 (Korea Bizwire) — With the cost of living soaring, essential household spending in South Korea has risen to an 18-year high, spurred in part by a precipitous increase in grocery prices.
Data from the Bank of Korea revealed on Wednesday that South Koreans spent nearly 317.2 trillion won on food, non-alcohol drinks, rent, utility bills, home maintenance and health care last year, four categories of household spending known as ‘essential spending.’
Last year’s essential household spending accounted for 41.1 percent of South Korea’s total household spending, which stood at 772.6 trillion won.
The figure is up 0.7 percent from 2016, the highest since 1999 when spending on essential items accounted for 41.9 percent of overall household spending.
Essential spending is usually seen as being immune to a country’s economic performance, unlike other items such as liquor, cigarettes, shoes, travel expenses, internet bills, education, and holidays, in which consumers first cut back spending when financially strapped.
Essential household spending began to decline gradually in South Korea after reaching 44.9 percent in 1990, as household income began to rise and household spending patterns become more diverse.
The share of essential spending in household spending continued to decline, reaching 40.8 percent in 2000.
The figure then plunged and stayed in the thirties between 2001 and 2015, before it reentered the forties in 2016.
“The inflation rate for food was higher than other categories. Since the economy and consumer confidence aren’t great, South Korean households aren’t opening their wallets for things other than the necessities,” said Kim Cheon-gu, a researcher at Hyundai Research Institute.
The inflation rate for consumption goods last year stood at 1.9 percent, while the figure for food and non-alcohol drinks stood at 3.4 percent, according to data from Korea Statistics.
Experts argue the trend will continue for some time, as income levels show no sign of rising soon.
“Due to the impact of the minimum wage increase, which put a damper on new hiring, household income levels remain stagnant. Though the economy will recover with exports, it will take more time for consumption to catch up,” Kim said.
Ashley Song (email@example.com)