COVID-19 Resurgence in Third Week of August
Growth Rate of Personal Credit Card Payments Slows
Offline Spending Decreases by 3.3% Due to Social Distancing Impact
On the 31st, as the novel coronavirus infection rapidly spreads mainly in the metropolitan area and social distancing level 2.5 is in effect, the area near Yonsei-ro in Seodaemun-gu, Seoul, shows a quiet scene. Photo by Jinhyung Kang aymsdream@
[Asia Economy Reporter Ki Ha-young] As the novel coronavirus infection (COVID-19) resurges, card consumption has also been recorded to contract again. With the implementation of strict social distancing measures from the fourth week of August, there are concerns that the consumption downturn will deepen further.
According to the aggregation by eight major credit card companies (Shinhan, Samsung, KB Kookmin, Hyundai, BC, Lotte, Woori, Hana) on the 4th, the personal credit card approval amount for the third week of August (17?23), when COVID-19 began to resurge, was 9.9974 trillion KRW. This is an increase of 3.2% (316.9 billion KRW) compared to the same period last year (August 19?25). Typically, card approval amounts increase by about 5?6% annually, considering natural growth factors such as inflation. Taking this into account, the resurgence of COVID-19 has frozen consumer sentiment, resulting in a reduction in card usage as well.
In particular, offline consumption shrank due to social distancing measures. Offline payment amounted to 7.6456 trillion KRW, a decrease of 26.47 billion KRW (3.3%) compared to the same period last year. On the other hand, online consumption increased by 581.6 billion KRW (32.8%) to 2.3518 trillion KRW. Online consumption thus compensated for the decline in offline consumption.
According to the 'Domestic Card Approval Performance' released monthly by the Korea Federation of Credit Finance Companies, the total card (credit, check, prepaid cards) approval performance in March, when COVID-19 spread, recorded 66.5 trillion KRW, down 4.3% from the previous year. April also saw a decrease of 5.6% compared to the previous year but turned to an upward trend from May. The approval amount in May was 78.1 trillion KRW, an increase of 6.8%. Especially in June, due to the impact of disaster relief funds, it surged by 11.0% to 75.7 trillion KRW. However, in July, the growth rate slowed to 6%, showing a sluggish trend as the increase in card usage narrowed compared to the previous month.
The industry estimates that a greater decrease in consumption occurred in the last week of August (24?30), when social distancing level 2 was maintained nationwide and level 2.5 was implemented in the metropolitan area from the 30th.
According to Korea Credit Data, which manages card payment information for small business owners, the average sales of small business establishments nationwide in the fourth week of August decreased by 25%. This is the lowest level since the last week of February (February 24?March 1), when the first wave of COVID-19 spread in earnest, which saw a 29% decrease. In particular, sales of small business owners in Seoul dropped by 32% compared to the same period last year, falling to the lowest level nationwide.
The Consumer Confidence Index (CCSI) for August announced by the Bank of Korea was 88.2, up 4 points from July but still lower than 104.2 in January before the COVID-19 spread. It is also highly likely to decline again from September. This survey was conducted before the implementation of social distancing level 2, and since then, the metropolitan area’s distancing level has been raised to 2.5.
An industry official said, "Since social distancing level 2.5 was implemented in the metropolitan area from the fourth week of August, card payment amounts are also expected to have decreased," adding, "If consumption contraction continues, there is a concern that negative growth rates may be recorded again."
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