Consumer spending in Korea on track for a rebound

The South Korean economy is projected to see a rebound in the second half of this year after a weak first-half, with positive signals from economic indices such as exports, output, and spending.

According to an analysis by Maeil Business Newspaper on Tuesday of the preliminary data on credit card sales, logistics and electricity usage, which reflect economic trends, consumer spending, which remained stagnant, is showing signs of recovery following a rebound in exports.

The trend is expected to be reflected in the government’s September industrial activity report to be released next month.

The government is weighing in on an upbeat economic outlook for the second half of the year, with a string of positive signals from economic data emerging.

One clear indicator of recent domestic consumption trends is credit card sales.

According to data from the Credit Finance Association, the average daily sales of card companies reached 3 trillion won ($2.23 billion) in September, the highest since related data began to be compiled in January 2019.

In the first eight months of the year, average month-on-month card sales growth contracted by 0.1 percent due to the risks of low growth in China, high interest rates, and rising oil prices, but it rebounded strongly in September, with a 4.2 percent increase.

The recovery in consumer spending is also pronounced in retail sales this month.

Shinsegae Department Store reported a 17.2 percent year-on-year increase in sales in the first seven days of this month while Hyundai Department Store and Lotte Department Store saw increases of 13.2 percent and 10.0 percent, respectively.

The resumption of Chinese group tours has also played a significant role.

In September, the number of Chinese tourists visiting Korea increased by 8.1 percent to 281,000 from the previous month, and sales at major duty-free shops in Seoul, including Shinsegae and Lotte, increased by up to 68 percent last month.

Exports and output have already began to recover.

In August, industrial activity saw its biggest increase in 30 months, led by the semiconductor industry. The manufacturing capacity utilization rate soared to a one-year high of 73.4 percent, and the trade balance posted its fourth consecutive month of surplus last month as production in key sectors increased.

However, the latest Israel-Hamas conflict in the Middle East and the uncertainty surrounding the persistence of high-interest rates in the United States are considered to be the most significant variables in the outlook for the recovery of the real economy.

“We need to see a more sustained flow of improvement before we can say the economy has entered a recovery phase,” said Sung Tae-yoon, a professor at Yonsei University.