"Eating Less Because It's Expensive"... Decrease in Food Spending

First Half Food Expenditure at 59.3 Trillion Won, Decreased Year-on-Year
Absolute Amount Increased but Real Consumption Declined Due to High Inflation

As the trend of high inflation continues for a prolonged period, it has been found that despite spending more money on food consumption than before, actual consumption is decreasing.

According to the Bank of Korea on the 12th, the domestic real food expenditure in the first half of this year was 59.3 trillion won, a 0.6% decrease compared to 59.6 trillion won in the first half of last year. During the same period, the real consumption expenditure of households on food service and accommodation also decreased by 1.4% to 58.4 trillion won compared to 59.2 trillion won in the same period last year.

As overall food expenditure decreased, the average monthly food expenditure per household also declined. According to Statistics Korea, the nominal food expenditure (including dining out and alcoholic beverages) per household in the second quarter of this year was 829,573 won per month, a 3.9% increase compared to the same period last year. However, when converted to real amounts reflecting price changes, the average monthly food expenditure was 685,409 won, similar to the same period last year.

Although the absolute amount spent on purchasing groceries increases every year, the real consumption volume is decreasing due to the decline in currency value caused by high inflation. As of the second quarter of this year, the prices of agricultural, livestock, and fishery products rose by 8.6% compared to the same period last year, while processed food and dining out prices increased by 1.6% and 2.9%, respectively. Although the price increase rates for processed food and dining out have somewhat slowed this year, they showed high annual increases of around 7% from 2022 through last year. This has increased the burden of food expenses, leading to reduced consumption.

Looking at expenditure trends by purpose, the average household expenditure on fresh food in the second quarter of this year was 149,000 won, a 3.7% decrease compared to 155,000 won in the same period last year. Fresh food expenditure also decreased by about 3.2% compared to the first quarter of this year (154,000 won), and by 18.1% (33,000 won) over four years compared to the second quarter of 2020 (182,000 won).

By income level, the middle-income group showed the largest decrease in food expenditure. The food expenditure of the lowest 20% income group (1st quintile) was 345,716 won, while the highest 20% income group (5th quintile) spent 1,092,832 won, indicating that food expenditure increases with income. However, while the 3rd and 4th quintile households’ expenditures decreased by 2.8% and 1.6%, respectively, the 1st quintile showed a 2.8% increase despite lower spending, suggesting that high inflation is affecting the lower-income groups more directly.

As food consumption decreases, the inventory rate of the food manufacturing industry is also rising. In the first half of this year, the average inventory rate of the food manufacturing industry was 99.3%, indicating good inventory management but an increase compared to 96.5% in the same period last year, approaching 100%. This is the highest figure since the first half of 2020 (100.5%). In particular, the inventory rate of the beverage manufacturing industry was 107.0%, showing that the total product inventory exceeded shipments.

However, despite the decrease in domestic consumption, the increase in exports is supporting the domestic food manufacturing industry. According to customs export-import trade statistics, the export value of agricultural, forestry, livestock, and food products in the first half of the year was 4.77 billion dollars (approximately 6.68 trillion won), a 6.7% increase compared to 4.47 billion dollars in the same period last year, maintaining a steady export growth trend. Additionally, processed food exports in the first half reached 4.3 billion dollars (approximately 6.02 trillion won), an 8.6% increase compared to 3.96 billion dollars in the same period last year. Among processed food items, rice-processed products including gimbap showed the highest export growth rate at 77.9%, followed by ramen (32.3%), gim (seaweed) (20.1%), and canned tuna (12.9%).

Park Mi-seong, a research fellow at the Korea Rural Economic Institute, explained, “Rice-processed foods such as instant rice and frozen gimbap are showing the highest export growth rates due to sustained interest in vegan and health foods, the Korean Wave, and increased presence in large U.S. retail stores like Costco.”

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