Department store sales drop 4.2 percent in January, the lowest in 37 months


Korea’s private consumption is declining rapidly, data showed Wednesday, amid sluggish sentiment sparked by the eurozone fiscal debt crisis.

Local consumers are tightening their belts to grapple with a slowing economy, which in turn deals a blow to manufacturers and big-ticket item sales. Sales at department stores slowed and imports of goods also dropped.

Private consumption fell 0.4 percent in the October-December period from the previous quarter, marking the first contraction since the first quarter of 2009, according to the Bank of Korea data.

Statistics Korea’s retail sales index also fell 2.2 percent during the same period, registering the lowest level since the last quarter of 2008.

Big-ticket items such as cars led the decline, while electronics and furniture sales also slumped.

Korean consumers are also slashing their budget on books for the three straight quarters, according to the statistics agency’s data, suggesting that the consumption trend has worsened considerably.

Analysts said Koreans have less money to spend, which could translate into weaker-than-expected domestic demand this year. The BOK earlier estimated that the country’s private consumption would reach 3.2 percent this year, a figure that increasingly seems to be optimistic.

“The actual private consumption would undershoot the BOK’s projection by a wide margin this year,” said Park Jeong-woo, analyst at SK Securities. “The higher housing rents and declining real income are having a negative impact on consumption.”

According to the Finance Ministry, the department store sales ― a key measure for consumer sentiment ― dropped 4.2 percent in January, to their lowest level in 37 months. Korean department stores enjoyed higher sales in December, only to see a far weaker-than-expected sales in January, even with the help of the Lunar New Year holiday.

Auto sales took a beating as well, declining 19.9 percent in January and extending the negative growth for four months in a row.

The cooling consumption poses a threat to Asia’s fourth-largest economy, which relies heavily on exports for its economic growth. As the eurozone debt woes cloud the export outlook, policymakers place their hopes on stronger domestic demand, but the results point to the opposite direction.

The BOK is widely expected to keep the benchmark rate unchanged at its policy-setting meeting on Thursday as the external uncertainties are feared to hurt the country’s growth amid the greater concerns about a global economic slowdown. 

By Yang Sung-jin (insight@heraldcorp.com)