Last year, South Korea's retail sales decreased at the largest rate since the 2003 "credit card crisis." A widespread consumption slump has raised concerns about a prolonged downturn in the domestic economy.
According to the Korean Statistical Information Service (KOSIS) on the 12th, the retail sales index for January to November last year fell by 2.1% compared to the same period the previous year. This marks the largest decline in 21 years since a 3.1% drop due to the 2003 card crisis.
The consumption slump is evident across all categories including durable goods like automobiles and home appliances, semi-durable goods like clothing, and non-durable goods like food and beverages. From January to November last year, consumption of durable goods fell by 2.8%, semi-durable goods by 3.7%, and non-durable goods by 1.3%.
The simultaneous decline in consumption of durable, semi-durable, and non-durable goods for two consecutive years is the first since the relevant statistics began to be compiled in 1995. During the 1998 financial crisis, consumption across all categories also recorded a negative figure, but rebounded the following year.
In particular, consumption of food and beverages had increased for 16 consecutive years from 2006 to 2021 when related statistics began to be compiled; however, it has declined for the past three consecutive years.
The service sector also shows a noticeable slowdown. From January to November last year, service production increased by only 1.5% compared to the same period the previous year. The growth rate of service production peaked at 6.9% in 2022 and then slowed to 3.4% in 2023, falling below half of that level last year.
Since October last year, expectations for recovery in domestic demand increased with the cut in the base interest rate, but analyses indicate that consumer sentiment has cooled again due to the 12·3 emergency martial law and the impact of high exchange rates.