Consumption Frozen, Eight Month Decreasing Streak

Consumptions are still in the doldrums. Wholesales and retail sales, which are the representative of domestic consumption business indicator, has been in its longest decreasing trend since the recording of the statistic concern was started.

According to “The service business activity trend of September and the third quarter (7th ~9th month)” announced by Korea National Statistical Office on October 10, the service industry production activity of September and the third quarter showed an increase of 1.1 percent and 1.2 percent respectively, compared with the same period last year.

Especially among service businesses, wholesales and retail sales in September have decreased by 2.6 percent compared with September of last year. It has been decreasing since last February, recording the longest decreasing streak since January of 2000, when the statistics was first recorded. It indicates that the recovery of domestic consumption businesses, including trends of wholesales and retail businesses, are still difficult although some analyzed that the general market recently showed symptoms that will turn to recovery with a favorable balance of foreign trade.

According to the classification by industry, “restaurant businesses” decreased by 2.8 percent and “rent and business service industries” decreased by 4.0 percent. Real estate brokerage decreased by 12.1 percent as housing transactions decreased due to the “9•5 countermeasure for real estate problem.” Meanwhile, transportation•warehouse businesses and communication industries have increased by 2.8 percent and financial insurance businesses increased by 4.4 percent. Byeon Hyo-seop, head of the service industry statistic section in the Korea National Statistical Office, said, “While service industry production is in a four-month streak of immaterial increase, wholesales and retail sales are in a decreasing streak. That is thought to be the reason why general trend of consumptions are in the long doldrums.”

Also in the industrial world, the outlook against recovery of domestic consumption prevails.

Koo Hak-seo, president of Shinsegae said, “It is difficult to expect recovery of domestic consumption before the problems of household debts and credit delinquents are solved. Consumption is thought to revive in earnest after the last quarter (10th~12th month) of next year.”

Kwang-Hyun Kim Yong Park kkh@donga.com parky@donga.com