Domestic consumption slumps sharply in November after gov't stimulus measures, Chuseok end

Korea’s domestic consumption slumped sharply in November. The index of retail sales, a key gauge of consumer spending, fell by the most in 21 months, underscoring how the record-breaking export boom has yet to translate into stronger domestic demand.

A street inside a traditional market in Seoul is almost vacant on Dec. 30. [NEWS1]

Korea’s domestic consumption slumped sharply in November as the effects of government stimulus measures and the Chuseok harvest holiday wore off. The index of retail sales — a key gauge of consumer spending — fell by the most in 21 months, underscoring how the record-breaking export boom has yet to translate into stronger domestic demand.

The retail sales index fell 3.3 percent in November compared to the previous month, according to the Ministry of Data and Statistics' “November Industrial Activity Trend” report released on Tuesday.

This marks the largest drop since February last year, when it fell 3.5 percent. After falling 2.4 percent in August this year and 0.1 percent the following month, retail sales rebounded by 3.6 percent in October, only to turn negative again in November.

Sales of nondurable goods, including food and beverages, declined by 4.3 percent, and sales of semidurable goods, such as clothing, fell by 3.6 percent. The drop in nondurable goods was the steepest since February last year, when the category declined by 5.4 percent.

By retail format, large discount stores saw a sharp 14.1 percent decline, followed by an 8.7 percent drop at supermarkets and general merchandise stores. Nonstore retail, which includes internet shopping, dropped 3.1 percent — the steepest decline since November 2022, when it fell by 3.9 percent.

“There was a base effect due to the increase in retail sales in October, which was driven by Chuseok, a sudden cold snap and a series of discount events,” said Lee Doo-won, the director general for economic statistics at the Data Ministry. “Still, cumulative retail sales through November this year are up 0.4 percent, and we may end the year in positive territory, breaking a three-year streak of annual declines.”

People shop at a large supermarket in Seoul on Dec. 30. [YONHAP]

Industrial output, which measures overall production activity, rose 0.9 percent from the previous month, bouncing back after a 3.7 percent plunge in October. The rebound was largely driven by semiconductors.

Amid soaring global demand for AI, semiconductor production surged 7.5 percent in November. The launch of new electronic products, including Samsung Electronics’ Galaxy Z Fold, also helped boost production of electronic components by 5 percent.

Facility investment rose 1.5 percent in November, reversing a 14.1 percent drop the previous month. Output in the service sector, a barometer of consumer activity, increased by 0.7 percent. Financial and insurance services rose 2.2 percent, and associations, repair and personal services jumped 11.1 percent.

People shop at a large retail store in Seoul on Dec. 30. [YONHAP]

The coincident composite index, which reflects current economic conditions, fell 0.4 points — its second consecutive monthly decline — mainly due to ongoing weakness in construction indicators. Meanwhile, the leading composite index, which forecasts future economic trends, rose 0.3 points.

“There are positive signs, such as strong semiconductor performance and improving consumer sentiment,” a Ministry of Economy and Finance official said. “We will expand the momentum for domestic recovery through proactive fiscal measures, including an extension of the individual consumption tax cut on automobiles.”

“The breach was reported at the end of November, so it’s unlikely that it affected this month’s data,” said the official when asked about the impact of the recent data breach at an online platform, likely referring to the personal information leak that affected 33.7 million Coupang customers, and the high exchange rate.

“The won-dollar exchange rate has been declining recently, so we need to monitor the trend,” the official added.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom. BY KIM YEON-JOO [lim.jeongwon@joongang.co.kr]