Household Spending Rose 4% in Q2 but Concerns Over Recession Due to 4th Wave

Statistics Korea 'Q2 Household Trends Survey'

[Sejong=Asia Economy Reporter Son Seon-hee] Household expenditures in the second quarter of this year increased by 4%. After domestic consumption sharply froze following the COVID-19 outbreak last year, it seemed to be easing, but concerns have arisen that consumption may shrink again due to strengthened social distancing measures as the fourth wave of the pandemic intensified in the third quarter.

According to the 'Second Quarter Household Trends Survey' released by Statistics Korea on the 19th, the average monthly household expenditure for households with one or more members nationwide (including agricultural, forestry, and fishery households) in the second quarter of this year was 3,308,000 KRW, a 4.0% increase compared to the same period last year. Consumption expenditure rose by 3.8%, and non-consumption expenditures such as taxes and social insurance premiums also increased by 4.6% simultaneously.

The 'average propensity to consume,' calculated by dividing consumption expenditure by disposable income, was 71.7%, up 3.9 percentage points from a year earlier.

Looking at detailed categories, education (31.1%) and health (10.6%) sectors showed double-digit growth rates in consumption expenditure, and consumption also increased in the housing, water, and utilities (7.8%) sector. It is analyzed that education sector expenditures increased as some face-to-face classes resumed in the second quarter and online non-face-to-face classes for academies and tutoring expanded.

Spending on medical consumables such as masks in the second quarter decreased by 45.6% compared to the second quarter of last year, but expenditures on pharmaceuticals (7.7%), outpatient medical services (21.8%), and inpatient services (55.3%) increased, leading to an overall rise in health sector consumption.

Notably, expenditures in the food and accommodation sector, considered a representative vulnerable industry during COVID-19, reached 343,000 KRW, a 3.3% increase compared to the second quarter of last year. Both dining out and meal expenses (2.4%) and accommodation expenses such as hotels and condos (43.6%) increased.

On the other hand, expenditures in clothing and footwear (-4.2%), household goods and domestic services (-7.0%), and transportation (-0.4%) sectors decreased.

Jung Dong-myung, Director of the Social Statistics Bureau at Statistics Korea, explained, "Consumption and non-consumption expenditures increased due to recovery in consumer sentiment following vaccinations and easing of social distancing. Consumption expenditure increased as consumer sentiment partially recovered in face-to-face service sectors such as education, entertainment culture, and food and accommodation."

However, it is uncertain whether this trend of increased consumption expenditure will continue into the third quarter. Since last month, the highest level 4 social distancing has been in effect for six weeks in the metropolitan area, and nationwide level 3 distancing is applied in non-metropolitan areas, raising concerns that consumption may freeze again.

The government plans to accelerate projects related to the second supplementary budget to support livelihoods in the second half of the year. The Ministry of Economy and Finance stated, "We will support more than 90% of the Small Business Hope Recovery Fund and the Coexistence National Support Fund by the end of September, and provide an additional 100,000 KRW National Support Fund for low-income households within this month."

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