[News Terms] The Era of 3 Highs: Even with Salary Increases, 'Jjanmul Consumption'

High Prices, High Interest Rates, and High Exchange Rates Increase Grocery Basket Burden
Income Up, Spending Down, Household Surplus Hits Q3 Record
High Prices and Heatwave Effects Expected to Continue Next Year

Due to high inflation and weakened consumer sentiment, 'frugal consumption' has become the trend. Frugal consumption refers to a spending pattern that minimizes expenses during economically difficult times. It means focusing purchases during sales periods, preferring low-priced items, buying in small quantities, and even changing brand choices to match reduced spending capacity.

According to Statistics Korea's "2024 Q3 Household Trend Survey Results," household income increased, but consumption did not rise proportionally. The average monthly income per household in the third quarter of this year was 5,255,000 KRW, a 4.4% increase compared to the same quarter last year. The average monthly consumption expenditure per household was 2,907,000 KRW, up 3.5% from the same quarter last year.

People Trying to Save Money
Photo by AI Image

Real consumption expenditure increased by 1.4%. Real consumption expenditure refers to consumption expenditure adjusted for price changes. Even though consumption expenditure rose by 3.5%, considering the inflation rate, it effectively increased by only 1.4%.

The contraction in consumer sentiment is also reflected in the average propensity to consume. In the third quarter, the average propensity to consume per household was 69.4%, down 1.3 percentage points from 70.7% in the same quarter last year. It had consistently stayed in the 70% range since the first quarter of last year but fell into the 60% range for the first time this quarter. A lower average propensity to consume means that even if disposable income is high, consumption expenditure is low. Accordingly, the household surplus reached a record high for the same quarter.

The reason for the consumption slump is the triple burden of high inflation, high interest rates, and high exchange rates, which increased the burden on shopping baskets. Climate inflation is cited as one of the root causes. Global abnormal weather led to rising raw material prices. For example, unprecedented heatwaves and heavy rains this fall damaged the cabbage harvest, causing cabbage prices to surge by about 1.5 to 2 times compared to last year. A new term, "Gimpo-jok" (Kimchi cabbage buyers), emerged during the kimchi-making season. Rising prices of coffee beans and cocoa were also identified as causes of inflation.

Increased Burden on Grocery Bills Due to High Inflation
Photo by Akyung DB

The Korea Rural Economic Institute (KREI) identified high inflation and heatwaves as the most prominent trends in food consumption this year. At the announcement of the "2024-2025 Food Consumption Trends" on the 13th, KREI highlighted seven major issues influencing food consumption this year: ▲high inflation ▲heatwaves ▲online food markets ▲artificial intelligence (AI) ▲food safety ▲Seongsimdang effect ▲Netflix cooking competition show "The Black and White Chef." They also analyzed that high inflation affected not only fresh agricultural products but also processed foods and dining out, causing significant consumer burden.

Furthermore, KREI selected seven food consumption trends for the next year, including ▲continued emphasis on cost-effectiveness due to high inflation ▲increased product variety and visit rates at convenience stores ▲trends toward ready meals and frugal consumption in response to the era of 10 million single-person households.

In fact, with the increase in frugal consumers, convenience store subscription services are also growing. Convenience store subscription services allow customers to purchase key products at discounted prices by paying a monthly fee. According to the convenience store industry, GS25's subscription service usage from January to November this year increased by an average of about 47.5% compared to the same period last year. During the same period, Seven Eleven's subscription service sales soared by a remarkable 200% compared to last year.