"Closing Wallets Due to Corona"... Card Spending Negative for Two Consecutive Months

January Card Approval Amount Down 2.0% Year-on-Year
Consumer Sentiment Rebounds

[Asia Economy Reporter Ki Ha-young] As consumption shrank due to the third wave of the COVID-19 resurgence, credit card approval amounts recorded negative growth for two consecutive months.

According to the "February Recent Economic Trends" (Green Book) published by the Ministry of Economy and Finance on the 20th, credit card approval amounts in January decreased by 2.0% compared to the same period last year. This marks a decline for two consecutive months following December last year (-3.9%), the first time since the first COVID-19 wave in March-April last year.

Credit card approval amounts had shown an increasing trend for seven consecutive months after decreasing by -4.2% in March and -5.7% in April last year, but fell again in December (-3.9%).

The Ministry of Economy and Finance stated, "Recently, our economy has improved in manufacturing and investment supported by the recovery in exports, but due to the third wave of COVID-19 and strengthened social distancing measures, domestic demand contraction continues mainly in face-to-face service industries, and employment indicators have significantly slowed, causing ongoing uncertainty in the real economy."

By consumption sector, discount store sales saw the largest decline at 12.4%, the biggest drop in 10 months since March last year (-13.8%). Department store sales also decreased by 6.7%. On the other hand, online sales surged by 18.1%, reflecting the impact of reduced face-to-face consumption and increased online consumption due to the third wave of COVID-19. Domestic sales of Korean passenger cars also increased by 20.9% compared to the previous year. The Consumer Sentiment Index rose by 4.2 points from December last year to 95.4.

Regarding the rebound in the Consumer Sentiment Index, Kim Young-hoon, head of economic analysis at the Ministry of Economy and Finance, said, "The biggest factor affecting the Consumer Sentiment Index after the COVID-19 situation is the number of confirmed cases. The slower increase in January compared to December influenced this, and the favorable financial market conditions also had a positive effect."

The card industry also analyzed that offline consumption shrank due to strong social distancing measures, leading to a decrease in credit card approval amounts for two consecutive months. Some express concerns that negative growth could continue for three consecutive months. Typically, credit card approval amounts decrease in months with the Lunar New Year holiday, but last year the holiday was in January, while this year it was in February.

An industry official said, "Due to the third wave of COVID-19 and strengthened social distancing, consumer sentiment has weakened, resulting in a decrease in card approval amounts for two consecutive months. Considering the base effect of the Lunar New Year holiday, card approval amounts may also decrease in February compared to the previous year."