'Consumption Coupon' Effect Limited... Retail Sales Turn Negative (Comprehensive)

Retail sales, which had surged in July due to the distribution of livelihood recovery consumption coupons, returned to negative territory. Despite the issuance of consumption coupons, retail sales saw their largest decline in 18 months as spending on food, beverages, and home appliances decreased. Total industrial production remained flat, while investments also fell, weighed down by declines in transportation equipment investment and construction performance.

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According to the "August Industrial Activity Trends" released by Statistics Korea on September 30, retail sales, which reflect household spending, fell by 2.4% compared to the previous month. This marks the largest decrease in 18 months since March 2024. In July, retail sales had increased by 2.7% from the previous month, the largest rise in 29 months, but turned negative just a month later. In particular, sales of non-durable goods such as food and beverages (-3.9%) and durable goods such as home appliances (-1.6%) both declined.

The effect of the consumption coupons, which began to be distributed in July, appears to have been short-lived. It is estimated that, as of August 3, 46% of the coupons had been used based on credit and check card spending, and as of midnight on August 28, 78% had been used. Although a significant portion of the coupons distributed in August was used, their impact on boosting consumption in August, as in July, seems to have been limited.

However, Statistics Korea attributed this to base effects from discount events and new product launches held in July. Lee Dowon, Director of Economic Trend Statistics at Statistics Korea, explained, "The decrease in durable goods sales was largely due to declines in home appliances and telecommunication devices. In July, the top-efficiency home appliance rebate program was conducted, and new telecommunication devices such as the Galaxy Z series were launched, leading to a 13.8% decrease in August." He added, "For food and beverages, the increase in prices of agricultural, livestock, and fishery products in August, along with a shift in consumption demand from goods to dining-out services due to the distribution of consumption coupons, had a significant impact."

The Ministry of Economy and Finance analyzed that the "late Chuseok" holiday this year delayed the positive effect of holiday consumption. Cho Sungjoong, Director of Economic Analysis at the Ministry, explained, "Usually, consumption increases as people buy Chuseok gifts starting three weeks before the holiday, but this year, with Chuseok falling in October for the first time in five years, the consumption effect was not seen in August." He added, "Some of the consumption that occurred before July 21, when the coupons began to be issued, would have been reflected in July, and in August, the impact of the late holiday likely overshadowed the effect of the coupons."

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The Ministry of Economy and Finance expects the effect of the consumption coupons to become more visible in September, as consumer sentiment remains at a favorable level. The Consumer Sentiment Index recorded 110.8 in July, 111.4 in August, and 110.1 in September, surpassing 110 for three consecutive months for the first time in seven years and eight months. Director Cho said, "We are monitoring preliminary indicators such as individual card sales, which increased by 5.3% year-on-year as of September 20. As the growth trend is expanding, consumption is also expected to increase again."

Last month, the all-industry production index remained at the same level as the previous month. While manufacturing output increased by 2.4%, the service sector (-0.7%), construction (-6.1%), and public administration (-1.1%) all declined, resulting in overall stagnation. By industry, automobile production rose by 21.2% and pharmaceuticals by 11.0%, but semiconductors decreased by 3.1%. Statistics Korea attributed the increase in automobile production to both the recovery from reduced output due to partial strikes in July and increased exports to regions outside the United States, such as Europe. However, the Ministry of Economy and Finance noted, "There may be some parts that are not fully seasonally adjusted," and added, "The automobile industry is greatly affected by annual vacations."

Facility investment decreased by 1.1%. While investment in machinery, including precision instruments, increased by 1.0%, investment in transportation equipment such as aircraft and ships fell by 6.0%. Construction performance, which refers to the actual volume of building and civil engineering works, also dropped by 6.1% from the previous month, widening the decline. The coincident composite index, which indicates the current economic situation, rose by 0.2 points to 99.2 last month. The leading composite index, which forecasts future economic trends, climbed by 0.5 points to 102.0.

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