Korean households earn and spend less in Q2 on high inflation

South Korean households’ real income took the largest fall in the second quarter of this year on rising inflation. Disposable income also saw the largest-ever decline as interest costs rose amid a series of benchmark hikes.

According to Statistics Korea on Thursday, the average monthly income per household reached 4.79 million won ($3,613) in the second quarter of this year, down 0.8 percent from a year ago.

Adjusted for inflation, real income fell 3.9 percent, the biggest drop since 2006, when the agency began compiling related data.

Earned income, in the meantime, rose 4.9 percent from a year earlier. While the increase was slower than the 8.6 percent in the previous quarter, it remained relatively high due to strong employment, according to the government.

Business income, on the other hand, rose 0.1 percent due to higher raw material costs and interest expenses. Transfer income plunged 19.6 percent due to the base effect as small businesses had been granted compensation payments for losses caused by the pandemic last year.

Property income rose 21.8 percent, while non-recurring income, such as condolence and insurance payments, fell 12.5 percent.

With declining income came slowed growth in spending.

The average monthly expenditure per household was 2.69 million won in the second quarter, up 2.7 percent from a year ago, but it was the smallest increase since 1.6 percent in the first quarter of 2021.

Real consumer spending adjusted for costs of living in the second quarter fell 0.5 percent in a year, turning negative for the first time in 10 quarters since 2.8 percent decline in the fourth quarter of 2020.

Non-consumption expenditures, which include taxes and interest, were 962,000 won, up 8.3 percent from the same period a year ago. The high growth came following 42.8 percent in the first quarter, largely as interest expenses rose 42.4 percent on higher interest rates.

Average monthly disposable income per household, which is income minus non-consumption expenses, was 3.83 million won, down 2.8 percent from a year earlier. It is the largest decline since the compilation of relevant data in 2006.