Will Consumption Revive?… April Card Approval Amount Up 18.3% YoY (Comprehensive)

Korea Credit Finance Association, 'April 2021 Card Approval Performance'
April Card Approval Amount Up 18.3% YoY
Increasing Trend for 3 Consecutive Months

Photo by Yonhap News

[Asia Economy Reporter Ki Ha-young] The amount of card (credit and debit) approvals has increased for three consecutive months, showing a clear recovery in consumption. It is analyzed that consumer sentiment, which was suppressed due to COVID-19, is reviving.

According to the 'April 2021 Card Approval Performance' announced by the Korea Federation of Credit Finance Associations on the 2nd, the card approval amount in April reached 81.3 trillion KRW, an increase of 18.3% compared to the previous year. During the same period, the number of approvals also rose by 13.2% year-on-year to 1.93 billion transactions.

Credit card approval amounts increased by 19% to 63.6 trillion KRW, while debit card approval amounts rose by 17.9% to 17.6 trillion KRW during the same period. Additionally, personal card approval amounts increased by 13.8% to 65 trillion KRW, and corporate card approval amounts surged by a remarkable 40.8% to 16.4 trillion KRW.

Card approval amounts have been on the rise for three consecutive months since February. After a 1.9% decline in January, the growth rates were 8.9% in February, 20.5% in March, and 18.3% in April, marking nearly 20% growth for two consecutive months. This is interpreted as a combined effect of pent-up consumption being released and a base effect from the contraction of consumer sentiment due to COVID-19 last year.

Compared to the pre-COVID-19 year 2019, card approval amounts also showed a clear recovery trend with increases of 3.7% in January, 15.8% in February, 15.4% in March, and 11.7% in April.

Recovery in Consumption but... Slower Recovery in Travel and Aviation

However, the results varied by industry. In April, the card approval amount for the transportation sector was 630 billion KRW, up 42.4% from last year, but down 56.6% compared to 2019. This decline is attributed to reduced use of airlines, railroads, and other transportation due to strengthened social distancing measures recommending limited travel and movement. Sales in travel-related service industries also suffered, with business facility management and business support services recording 230 billion KRW, a 19% increase from last year but still 44% lower than in 2019. During the same period, accommodation and food services increased by 3%, but were down 10.9% compared to 2019.

An industry insider said, "Considering inflation rates, card approval amounts have grown by 5-6% annually. While this can be seen as a clear recovery in consumption, consumption in sectors such as travel and accommodation, excluding specific industries like department stores where revenge spending occurred, has yet to recover."

Meanwhile, the Consumer Sentiment Index has shown improvement for five consecutive months. According to the Bank of Korea's May Consumer Survey, the Consumer Confidence Index (CCSI) for May was 105.2, up 3 points from the previous month. This is the highest level since the spread of COVID-19 began and has remained above the baseline of 100 for three consecutive months, continuing an optimistic trend.

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