KDI "Consumer Sentiment Plummets Amid COVID-19 Resurgence"…Credit Card Spending Down 16%

KDI Publishes January Economic Trends

[Sejong=Asia Economy Reporter Kim Hyunjung] The Korea Development Institute (KDI) diagnosed that the economic downturn in South Korea continues due to the impact of the third wave of the novel coronavirus infection (COVID-19).

On the 8th, KDI published the 'January Economic Trends,' analyzing that "despite the recovery trend in manufacturing, the rapid resurgence of COVID-19 has caused the economic downturn to persist, mainly in the service sector." KDI explained, "Manufacturing continued its recovery as durable goods consumption, facility investment, and goods exports maintained a high growth rate," but "the service sector is judged to be worsening due to the nationwide resurgence of COVID-19 and strengthened quarantine measures since mid-November."

In fact, the manufacturing sector is relatively favorable. The average operating rate of manufacturing (73.8%) exceeded the previous year's average (73.2%), shipments increased (-3.1% → 1.2%), and inventory ratio decreased (109.0% → 107.4%). December exports recorded a growth rate of 12.6%, higher than the previous month (4.1%). In particular, the growth in semiconductors (30.0%), displays (28.0%), and wireless communication devices (39.8%) expanded.

On the other hand, consumption and consumer sentiment sharply contracted due to the resurgence of COVID-19, causing related indicators to plummet. November retail sales recorded a growth rate of -1.5%, showing a larger decline than the previous month (-0.1%).

Especially, credit card sales sharply decreased. According to estimates by Shinhan Card, December credit card sales fell by 16.2% compared to the previous month, significantly shrinking compared to the previous month (-4.2%). This level is similar to March (-16.5%), when the first major wave of COVID-19 occurred.

The Consumer Sentiment Index also dropped 8.1 points from the previous month (97.9) to 89.8, indicating a rapid contraction in consumer sentiment.

KDI diagnosed, "As quarantine measures such as bans on gatherings of five or more people and business restrictions on some service sectors have been strengthened, credit card sales have rapidly decreased, potentially deepening consumption sluggishness centered on the service sector," and "With the global spread of COVID-19 continuing, business sentiment indicators are also declining again, expanding economic uncertainty."

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