The KOSPI index closed at 4129.68 on the 26th, up 21.06 points (0.51%) from the previous day. It has risen about 72% from the last trading day of last year (2399.49), extending a hot streak. But unlike the stock market, domestic demand has cooled. Consumers are ordering delivery food less and cutting back on convenience store snacks.
According to the Bank of Korea on the 27th, the consumer survey index (CSI) for December was 109.9, down 2.5 points from the previous month. It was the largest drop since December last year (-12.5 points), when consumer sentiment slowed under the impact of martial law. The CSI quantifies survey responses on consumers' perceptions of economic conditions and their outlook for future consumption expenditure. The decline in the index is interpreted to mean that fewer people view the overall economy positively than last month.
◇ Delivery consumption uptrend breaks, convenience store expenditure also falls
A person surnamed Kim, an office worker in their 30s who works near Gangnam Station in Seoul, said, "Every December, I used to order delivery food and watch year-end awards shows with friends, but looking at delivery prices these days, I can't bring myself to do it." The person added, "This year, I plan to eat food my parents make."
According to the Ministry of Data and Statistics (MODS), the number of delivery dining-out expenditure transactions in December rose only 2.5% from the previous month. That is less than half the November month-over-month growth rate (6.7%). The convenience store sales value index also fell from 126.6 in September to 125.6 in October. While sales were higher than in the base year of 2020, they declined from the previous month. This is interpreted to mean consumers cut back on dining out or snacks that are not essential food items.
Big-box stores and online retailers are in a similar bind. The Ministry of Trade, Industry and Energy's "November major retail sales trends" show that big-box store sales fell 9.1% from a year earlier. In November last year, they rose 5.7%, but this year they turned to a decline. For online players such as Coupang, the November sales growth rate (5.3%) was the lowest since August 2023 (3.2%).
◇ Income is flat, prices are rising… people keep their wallets shut
The consumption slowdown stems from flat growth in real income while interest burdens from home purchases or rent loans have increased. Real income in the third quarter rose 1.5% from last year. The growth rate was in the 2% range from the third quarter of last year to the first quarter of this year, then stagnated at 0.0% in the second quarter, and remained low in the third quarter. The household monthly average interest expense growth rate in the third quarter was 12.1%, the highest in two years since the third quarter of 2023 (20.4%).
Recently rising prices are also making consumers close their wallets. Consumer prices rose 2.4% in November from a year earlier, the same pace as in October. The living cost index, which focuses on items people buy frequently and is close to perceived inflation, climbed 2.9%. It was the highest rise in 1 year and 4 months since July last year (3.0%). On top of that, the won-dollar exchange rate has climbed from the 1,300-won range in June to the 1,400-won range recently, driving up import prices.
◇ "How can it be this quiet at year's end?" Small business owners sigh
Small business owners are also struggling with the disappearance of the year-end boom. A person identified as A, who runs a sashimi restaurant in Gwanghwamun, Seoul, said, "If last year group dinners were canceled one after another because of martial law, this year there's nothing special going on, yet there are no reservations at all." A person identified as B, who operates a fried chicken restaurant in Mapo District, said, "Even regulars have stopped coming, and delivery orders have dropped a lot."
Because of the drag from weak domestic demand since last year, small business owners have had trouble repaying loans, and banks are raising lending thresholds. According to the Data Agency, the delinquency rate on loans to sole proprietors was 0.98% last year, the highest since 2017. This year, the outstanding loan balance for sole proprietors at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) fell by 449 billion won. In 2023–2024, it had increased by 5 trillion to 6 trillion won each year. This year, the five major banks increased loans to large companies and small and midsize companies by more than 10 trillion won each.
Payouts of the closure benefit under the Yellow Umbrella Mutual Aid, a public program to help small business owners who face management crises or close their businesses, are on track to hit an all-time high this year. Payouts in January–September this year reached 1.1879 trillion won, approaching the full-year total for last year (1.3909 trillion won). Seok Byung-hun, a professor of economics at Ewha Womans University, said, "Recently, the stock market is being lifted by a few industries, but instead of asset revenue flowing into consumption, it remains in savings," adding, "With price pressures from the strong dollar layered on top, a year-end consumption recovery is bound to be limited."