The Bank of Korea: "Decline in Korean Consumption Propensity Led by Uncertain Future Income Among Those Aged 50 and Above"

[Asia Economy Reporter Kim Eunbyeol] Recent declines in the propensity to consume in South Korea have been driven primarily by households aged 50 and above and high-income households. Essential expenditure items related to food, clothing, and shelter led the overall decrease in consumption propensity. Despite the rapid progression of population aging, households aged 50 and above, who face instability in their retirement income sources, have significantly reduced their consumption due to anxiety.

According to the "Monthly Statistical Bulletin" released by the Bank of Korea on the 24th, the overall household consumption propensity fell by 5.7 percentage points between 2012 and 2018, with changes in consumption propensity by age group (-5.5 percentage points) contributing significantly. Changes in income share by age group (-0.2 percentage points) had a relatively smaller contribution.

Analyzing the effect of the decline in consumption propensity by age group, the decrease was particularly notable among households in their 50s and those aged 60 and above. The contribution to the decline from the 50s age group (-2.1 percentage points) was the largest.

The contribution of changes in income share by age group (composition effect) to the decline in consumption propensity is analyzed as a result of the rapid advancement of aging, which increased the proportion of elderly households with relatively lower consumption propensity. The proportion of household heads aged 60 and above rose by 6 percentage points, from 25.0% in 2012 to 31.0% in 2018.

By expenditure category, essential spending items related to food, clothing, and shelter led the overall decline in consumption propensity more than durable goods.

Kim Daeyong, Deputy Governor of the Bank of Korea, explained, "Although aging is progressing rapidly, retirement income sources are not stable, so households aged 50 and above have considerable anxiety about future income." He added, "This concern about future income is estimated to have significantly influenced the decline in consumption propensity since 2012."

Deputy Governor Kim continued, "Recent fluctuations in consumption propensity are greatly affected by the structural factor of population aging in our economy, so returning to consumption propensity levels seen in the early to mid-2000s will face considerable constraints." He emphasized, "When implementing future policies, it is necessary to be cautious to prevent sudden changes in expectations about future income."

This content was produced with the assistance of AI translation services.