‘Closed Wallets in Daejeon and Chungnam’, Consumption Growth Rate Below National Average

[Asia Economy (Daejeon) Reporter Jeong Il-woong] The consumption growth rate in the Daejeon and Chungnam regions received a report card below the national average. Amid this, the region showed a peculiar characteristic where intra-regional consumption sharply decreased while extra-regional consumption rather increased.

According to the “Analysis Report on Changes in Consumption Behavior in Daejeon and Chungnam Regions after the COVID-19 Pandemic” released on the 17th by the Bank of Korea Daejeon·Chungnam Headquarters (hereinafter referred to as the BOK regional headquarters), the consumption growth rate of residents in Daejeon and Chungnam dropped by 1.4 percentage points from 3.5% in January-September last year to 2.1% in January-September this year. Considering that the national average consumption growth rate this year is 2.3%, the consumption growth rate in Daejeon and Chungnam is 0.2 percentage points lower than the national average.

The BOK regional headquarters analyzes that the decrease in the consumption growth rate in Daejeon and Chungnam was closely influenced by the spread of COVID-19. In fact, during March-April when COVID-19 spread, Daejeon and Chungnam experienced a sharp drop in consumption, and consumption patterns seemed to temporarily recover in May-June as the pandemic subsided. However, as COVID-19 resurged again in July-September, the recovery trend in the consumption growth rate noticeably slowed down. This adds credibility to the view that COVID-19 was the main factor affecting the increase and decrease of the consumption growth rate within the region.

However, even though overall consumption contracted, the scale of extra-regional consumption increased. This means that while residents’ consumption within Daejeon and Chungnam decreased, their spending in other regions increased.

For example, the intra-regional consumption growth rate of residents in Daejeon and Chungnam fell by 5.3 percentage points from 0.5% in January-September last year to -4.8% in the same period this year, whereas the extra-regional consumption growth rate increased by 1.8 percentage points from 6.2% last year to 8.0% this year.

In particular, consumption by residents from other regions within Daejeon and Chungnam dropped more sharply, falling from 0.8% last year to -19.3% this year.

The BOK regional headquarters cites the geographical location of Daejeon and Chungnam and the concentration of the service industry as causes of this phenomenon. Considering the nationwide sharp decline in travel and transportation demand along with the region’s specialization in the service sector, it is argued that the impact of the COVID-19 pandemic on the consumption growth rate in Daejeon and Chungnam may be more sensitive than in other regions.

In fact, in Daejeon, during the COVID-19 resurgence in June-July, the consumption growth rate showed a relatively larger drop compared to Chungnam and the national average. Also, since the Korea Railroad Corporation (KORAIL) headquarters is located in Daejeon, the decrease in railway passengers is a unique factor leading to a reduction in local consumption inflow, the BOK regional headquarters explains.

Behind the increase in the extra-regional consumption ratio is also the influence of the normalization of online consumption. The spread of COVID-19 not only dampened consumer sentiment but also significantly reduced face-to-face consumption. The BOK regional headquarters analyzes that residents of Daejeon and Chungnam reduced their consumption within the region but increased consumption through online vendors (large online markets based in the Seoul metropolitan area, etc.), thereby raising the extra-regional consumption ratio to some extent.

Lee In-ro, head of the Planning and Finance Team at the BOK regional headquarters, said, “Considering that the COVID-19 situation is unlikely to end in the short term, the recovery of face-to-face service industries is expected to be slow. In particular, Daejeon and Chungnam are presumed to respond more sensitively to the COVID-19 situation due to their geographical location and high proportion of the service industry.”

He added, “In the case of Daejeon, it also showed more vulnerability to a series of consumption behavior changes after COVID-19,” and suggested, “Attention should be paid to the possibility that damage may be concentrated on vulnerable groups such as small business owners in the region, and there is a need to support them through policy measures.”

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