Consumer spending may weaken as it did after the 2014 shipwreck | So Good News
South Korean consumer spending is expected to slow as the country recovers from the Itaewon disaster that killed more than 150 people, similar to eight years ago when the Sewol ferry sank that killed more than 300 people, mostly teenagers on a school trip.
While the economy is expected to grow to zero or decline in the last quarter of this year amid exports, some observers say the Itaewon disaster could accelerate the economic downturn.
Weeks after the April 16, 2014 boat disaster, depressed and depressed Koreans spent a lot of money, causing the economy to shrink.
According to data from the Ministry of Finance at the time, the amount of money spent on credit cards went from 25 percent on April 14 and 15 to 6.9 percent on April 16 to 20, and dropped to 1.8 percent in the last week of the month.
Private sector spending in the first three months of 2014 grew by 0.5 percent from the previous quarter, but fell by 0.2 percent in the three months to April.
Saturday’s accident is also expected to dampen consumer sentiment as businesses and other organizations have canceled events and gatherings after the government declared this week a period of mourning, according to observers.
If such sentiment persists, the economy, already affected by sluggish exports, inflation, high interest rates and a weak Korean economy, could push for more private sector cooperation, he added.
Data from Statistics Korea showed on Monday that the country is already seeing a three-fold decline in industry, consumption and income.
The September sales index fell by 0.6 percent from the previous month to 117, while the number of retail sales, a financial indicator, fell by 1.8 percent, following an increase of 4.4 percent in August, and real estate sales fell by 2.4 percent.
Production of primary metals fell 15.7 percent after Posco stopped operating its steel mill in Pohang, North Gyeongsang Province, after it was flooded by typhoon Hinnamnor in early September.
Manufacturing of semiconductors, a major export, also fell 4.5 percent in the same month while equipment grew 0.6 percent compared to August, and jumped 54.7 percent from a year earlier.
“Semiconductor production fell after factory closures in China and a slowdown in the IT industry,” said Eoh Woon-sun, an official at Statistics Korea, which oversees economic statistics.
September production was up 0.2 percent from last month, and 9.5 percent from a year ago, mainly due to an increase in chips.
According to the Bank of Korea, real domestic production in the three months to September rose 0.3 percent from the previous quarter, down from 0.6 percent in the first quarter and 0.7 percent in the second.
Helping the economy grow, rather than shrink, in the third quarter despite strong global demand for semiconductors was domestic consumption, especially during the Chuseok holiday.
The central bank’s chief statistician Hwang Sang-pil told reporters last week that private consumption recovery, which grew in the second and third quarters, should slow due to higher interest rates and inflation.
The consumer index for October, which was announced by the Bank of Korea last week, fell by 2.6 points from the previous month to 88.8. A score of less than 100 indicates pessimism.
By Kim So-hyun ([email protected])