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Korean Households' Real Income Fell For The First Time In 7 Years

By February 25, 2017 at 7:13 am
Average spending by a Korean household every month was 3.36 million won in 2016, down by 0.4 percent from the earlier year. (Photo : WSJ.com)

A stagnant economy and ongoing corporate restructuring led to the first drop in the real income of South Korean households in seven years, according to data from the statistics office released Friday, sparking more worries about the country's tepid domestic consumption.

The average monthly income of households, or a family of more than two people, rose 0.6 percent in 2016 from the earlier year to 4.4 million won, the smallest increase since Statistics Korea started compiling the data in 2003. Consumption expenditure fell 0.5 percent, with bigger declines recorded in clothing and transportation spending, the data showed.

With real income declining, less money is being spent by people in the country, where domestic consumption has dropped. Data showed that the average spending by a household every month was 3.36 million won, down by 0.4 percent from the earlier year.

Consumer spending on the transportation-related sector was down 4.3 percent less. The government said that fewer consumers bought vehicles in 2016 and spent less on automobile fuel because of the drop in global crude oil prices. 

People's spending on the telecommunications sector was down 2.5 percent as fewer purchased new mobile phones. Consumers, however, spent 5.3 percent more on cigarettes and alcohol during the same period, according to a report by Korea Joongang Daily.

While exports unexpectedly did better than expected due to improving global economy, consumption is missing forecasts and sentiment continues to be weak, according to a statement by the Bank of Korea earlier this week. The central bank projects the economy to grow by 2.5 percent in 2017, the slowest rate since 2012.

Statistics Korea also said the labor market was weak in 2016 and that the growth in wages was lower compared to previous years.

The number of workers rose by 299,900 in 2016 compared to the previous year, which pales in comparison to 337,000 in 2015 and 533,000 in 2014. The wage growth rate also declined to 1 percent on-year compared to 1.6 percent in 2015 and 3.9 percent in 2014. 

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