Economy in general: Economy: News: Hankyoreh

Gongdeok Market in Mapo-gu, Seoul. Hankyoreh materials

The proportion of money spent on’eating and sleeping’ in last year’s consumption expenditure has risen to an unprecedented level due to the influence of households strangled by the coronavirus economic crisis. While the proportion of basic living expenses increased, the proportion of expenses related to self-development and leisure such as culture and education decreased, leading to a low quality of life. According to the Hyundai Economic Research Institute’s report on’Features and Implications of Household Consumption in National Accounts’ published on the 9th, the share of food and beverage expenditure in household consumption last year (Engel index) was 12.9%, up 1.5 percentage points from the previous year (11.4%). . This is the highest level in 20 years since 2000 (13.3%). The share of housing expenses such as rent and water, electricity, and heat (Schwabe Index) also increased 1.1 percentage points to 18.7%, the highest in 14 years since 2006 (18.8%). The Engel index, which is the share of food and beverage expenditures, and the Schwabe index, which is the share of housing expenses, tend to decline as the income level increases. However, the researchers interpreted that the reason why these indexes surged at an unusual rate last year was because households reduced unnecessary consumption as uncertainties increased due to the Corona 19 incident. Income (total disposable income) growth rate fell from 1.7% in 2019 to 0.4% last year, while consumption (domestic consumption expenditure) sharply reversed from an increase of 2.8% in the same period to a decrease of 3.4%. Compared to the level of slowing income, excessive consumption contraction occurred. This trend was observed even when the proportion of entertainment, sports and culture in consumption expenditure by category fell from 7.4% to 6.0%, and education expenses fell from 5.5% to 4.8%. The phenomenon of qualitative decline in household consumption appeared. The rise in Engel’s index was also affected by a surge in prices for the’dining table’. Last year, consumer prices rose only 0.5%, but food and beverages rose 4.4%. The report predicted that the recent surge in global agricultural product prices (afflation) has led to a steep rise in import prices, which is likely to serve as a reason for raising the Engel index in the future. It was analyzed that the surge in the Schwabe index was attributable to the increase in rent for cheonsei as a result of rising housing prices. The housing sales price index surged 3.8% last year, causing instability in the cheonsei market, raising overall housing costs. The housing jeonse price index, which fell 2.0% in 2019, rose 1.4% (January-November average) in 2020. The integrated monthly rent price index also reversed from a 1.1% decline in 2019 to an increase of 0.8% in November 2020. On the other hand, the share of clothing and shoes purchases among household consumption fell 0.9 percentage points last year to 5.2%, the lowest since 1970, when statistics were written. The report analyzed that this was due to a sharp drop in demand due to the contraction of face-to-face economic activity due to the spread of the corona. Nevertheless, the share of household consumption, including food, clothing and shelter, increased by 1.7 percentage points last year to 36.8%, the highest in 15 years since 2005 (37.0%). The researcher suggested that in order to ease the burden on households’ basic living expenses and increase the quality of consumption, fiscal policy should strengthen the economic stabilization function in order to expand real income. “Consumption indicators have a very strong history effect, so if the low consumption level is prolonged, it is hard to recover even if the economic shock is resolved,” said Joo-won, head of the economic research department at Hyundai Economic Research Institute. We must strive to normalize the market,” he pointed out. Senior Reporter Han Kwang-deok [email protected]