Real Income Dropped for the First Time Since the Financial Crisis.

It was revealed that Korea`s semiannual real income has dropped for the first time in 4yrs and 6months, in the first half of this year (from Jan-June). Also consumer price hike that citizens actually feel is constantly higher than real consumer price increase.

The Bank of Korea announced on Sep. 8 that the real GNI(gross national income) in the first half of this year has fell by 0.8% compared to the same period last year.

It is the first time for a semiannual real GNI to drop since late 1998(―8.6%), when Korea was still suffering from the financial crisis.

Also during the second quarter(April∼June), nominal GNI increased by 3.6% from the same period last year, marking 151.7338trillion won but real GNI that did not take into account inflation rate, increased by just 0.2%.

Real GNI in the second quarter turned positive from its negative trend in the first quarter (―1.8%) as trade conditions improved, but still it was far lower than real GDP growth rate of 1.9%.

This phenomenon of the real GNI growth rate hovering below the real GDP growth rate has been continuing for the five consecutive quarters since the second quarter of last year.

The BOK`S Economic Statistics Department Chief Cho Sung-jong said, “When the real GNI growth rate is below the real GDP growth rate, it means that real purchasing power of people is weakened due to unfavorable trade conditions, and in this situation, people feel that economy is performing worse than the actual economic growth rate. ”

`GDP deflator`, which means the composite consumer price index of the entire national economy, grew by 1.8% from the same period last year, influenced by strong won(drop in won exchange rate) in the second quarter.

Particularly, during this period, `Domestic Consumption Deflator`, which shows consumer price felt by citizens, went up by 4.3%, due to increases in consumer price and wages, marking constant growth from 6.5% in the first quarter.

Domestic Consumption Deflator in the entire first quarter marked 5.4%, outstripping the increase of 3.8% in consumer price in the same period by far.

Joong-Hyun Park sanjuck@donga.com