Domestic Consumption Shows Signs of Slowing Further

  • By Lee Ki-moon, Jang Hyeong-tae

    May 26, 2018 07:51

    Koreans are tightening their purse strings ever further in a worrying sign that the slump continues for all but the biggest exporters.

    Stores not only see fewer customers, but the ones that come spend less. One staffer at a Hanssem furniture store said, "Last year, if expensive items like sofas were on sale, they sold like hot cakes, but this year even these spur-of-the-moment purchases are rare. Our store is often empty on weekdays."

    In downtown Seoul, a big electronics store was deserted late Tuesday afternoon even though it was a public holiday. Only one customer wandered forlornly about among the dozens of huge flat-screen TVs optimistically on display.

    A man browses televisions in an electronics store in Seoul on Tuesday.

    The store has managed to sell only 150 to 200 TVs a month this year, down around 10 percent from last year. "Sales actually shrank despite major TV events this year like the Winter Olympics in Pyeongchang and World Cup in Russia," a staffer said. That puts paid to the received industry wisdom that big sporting events ahead guarantee a TV sales boom. Both Samsung and LG saw TV sales shrink so far this year although the World Cup looms.

    The car market is faring no better. In the first quarter, car sales were down 4.3 percent on-year at 359,000 vehicles. If customers bought at all they plumbed for affordable smaller models, which surged 37 percent, but sales of mid-sized and large cars fell 16.7 percent and 21.2 percent.

    The trend is typical of a recession. Smartphone stores are no longer beaming when new models come out. Only 1.4 million mobile phone customers switched carriers in the first quarter, the lowest in 14 years. The figure is a useful gauge of the industry's health because customers usually switch when they spot a bargain on a brand-new model elsewhere.

    Business conditions for companies that depend on the domestic market rather than exports are at an all-time low. The business survey index for those companies fell to a deeply pessimistic 69 points in March, even lower than the already pessimistic index of exporters, which came in at 82 to 86.

    The BSI gauges expectations for business six month down the road, and a figure below 100 means pessimists outnumber optimists. Businesses complain that buoyant official figures are way off the mark because the stellar sales of a handful of blue chip companies are distorting reality.

    "We can't make new investments because of expected cost for the minimum wage hike and shorter working hours," one staffer at a mid-sized company said, "The warning lights are flashing, but the government doesn't seem to be worried."

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