Both personal credit card spending and tourism spending fell during the summer vacation season. Record heat waves and other factors played a role, and the recent plunge in the domestic stock market is also cited as a backdrop.
According to the Ministry of Data and Statistics (MODS) Nowcast index on Aug. 6, credit card spending in the fourth week of July (18–24) fell 12.9% from a year earlier. It was the steepest weekly drop since January.
Spending in most sectors except health was lower than the same period last year. ▲ Lodging services -18.5% ▲ Entertainment, sports and culture -15.3% ▲ Apparel and footwear -14.6% ▲ Education services -7.3% ▲ Food and beverages -5.1%, among others.
By region, Incheon saw the largest decline, with credit card spending in the fourth week of July down 22.4% from a year earlier. It was followed by ▲ Sejong -18.4% ▲ North Jeolla -14.7% ▲ South Chungcheong -14.6% ▲ North Chungcheong -14% ▲ Gangwon -13.3% ▲ Seoul -13.1% ▲ Gyeonggi -12.6% ▲ South Jeolla and Gwangju -12.5% ▲ Daejeon -12.1%, all down by double-digit percentages.
By age group, credit card spending in the fourth week of July among people in their 40s and 50s fell 16.1% and 15.3%, respectively, from a year earlier, underperforming the average (-12.9%). People in their 20s and 30s were down 7.6% and 9%, respectively, from a year earlier.
Unlike the continued increase in foreign tourist spending, domestic tourist spending also retreated. According to the Korea Tourism Organization (KTO), total domestic tourist spending in the fourth week of July was 3.21 trillion won, down 4.3% (180 billion won) from a year earlier.
Along with heat waves and sluggish domestic demand, the stock market plunge appears to have also weighed on spending. The KOSPI index peaked at 9,385.59 on June 19 and kept falling, breaking below the 7,000 level on July 24. During the same period, forced liquidations of unsettled margin trades totaled 1.083 trillion won. Forced liquidations of credit trades are estimated to be larger.
On online communities and social media (SNS), posts in July said they "did not extend personal training (PT) at the gym because the bank account is 'empty' due to falling stock prices," or that they are "canceling nonessential dinner plans."
According to a research report the Bank of Korea released in May titled Evaluation of the stock asset effect in Korea, stock movements affected household consumption. In particular, the consumption boost during rising markets (0.012) was smaller than the consumption pullback during falling markets (0.015). In rising markets, when stock prices rise by 10,000 won, households channel about 120 won into consumption; in falling markets, when stock prices drop by 10,000 won, they cut consumption by about 150 won.
However, as the peak summer vacation season began, airline booking rates and reservations at luxury hotels and resorts were similar to, or slightly higher than, a year earlier. This is seen as clear polarization.
From the last week of July to the first week of August, the airline booking rate at major domestic carriers was 86%, 4 percentage points higher than a year earlier. An official at a major hotel and resort also said, "The room occupancy rate is around 90%, with little difference from last year."