Real Consumption Expenditure Falls 0.7% in Q3 Despite "Livelihood Recovery Consumption Coupons"

National Data Office Releases "Third Quarter Household Trend Survey" on the 27th
Household Income Up 3.5% in Q3
Real Consumption Expenditure Records Negative Growth for Third Consecutive Quarter

In the third quarter of this year, household income increased by 3.5% compared to the same period last year. However, real consumption expenditure, which reflects inflation, decreased by 0.7%. Despite the government’s distribution of livelihood recovery consumption coupons since July, real consumption expenditure recorded a negative figure for the third consecutive quarter. The National Data Office analyzed that the shift of the Chuseok holiday to October this year led to a reduction in holiday-related spending.

According to the “Third Quarter Household Trends Survey Results” released by the National Data Office on November 27, the average monthly household consumption expenditure in the third quarter of this year was 2,944,000 won, up 1.3% from the same period last year. However, real consumption expenditure, which excludes price fluctuations, decreased by 0.7% compared to a year ago. Although the livelihood recovery consumption coupons were distributed, real consumption expenditure still declined. The real consumption growth rate has remained negative since the fourth quarter of last year (0.9%).

Seo Jihyun, Director of Household Income and Expenditure Trends at the National Data Office, explained, “With Chuseok moving to the fourth quarter this year, holiday-related spending on items such as food and beverages was largely absent, which played a significant role. Even in terms of nominal expenditure, food spending saw a notable decrease (-1.2%). Given the significant impact of inflation, real consumption expenditure was pulled down even further.”

By category, spending on education (-6.3%) and culture and recreation (-6.1%) saw the largest declines compared to the same quarter last year. A representative from the National Data Office explained, “Education consumption continues to decrease due to the declining school-age population.” Expenditure on culture and recreation was 177,000 won, reflecting the impact of a decrease in group and overseas travel expenses (-14.1%).

In contrast, spending increased for food and accommodation (4.1%) and transportation (4.4%). Food and accommodation expenditure was 487,000 won. While spending on accommodation (-4.1%) decreased, spending on meals such as dining out (4.6%) increased. The National Data Office explained, “The livelihood recovery consumption coupons appear to have had the greatest impact on dining out expenses.”

Yonhap News Agency

Effects of Consumption Coupons: Public Transfer Income Up 40.4% in Q3

The average monthly household income in the third quarter was 5,439,000 won, up 3.5% from the same period last year. Household income has increased for nine consecutive quarters since the third quarter of 2023. While labor income (1.1%) and business income (0.2%) also rose, the largest increase was seen in transfer income (17.7%). In particular, public transfer income surged by 40.4%, largely due to the distribution of livelihood recovery consumption coupons. Average monthly disposable income was 4,381,000 won, a 4.6% increase from the same quarter last year. The surplus, calculated by subtracting consumption expenditure from disposable income, was 1,437,000 won, up 12.2%.

Real monthly income, adjusted for inflation, increased by 1.5%. However, real labor income and real business income, which account for a large share, decreased by 0.8% and 1.7%, respectively. Both have declined for the second consecutive quarter. On the other hand, due to the impact of the consumption coupons, real transfer income increased significantly by 15.5%. Director Seo explained, “Real labor income decreased because, although the number of wage earners increased, wage growth at businesses was not significant.”

By income bracket, all quintiles from the first to the fifth saw income growth. The average monthly income of the first quintile was 1,313,000 won, an 11.0% increase from the same quarter last year. The fifth quintile (top 20%) income was 11,584,000 won, a 0.4% increase from the same period last year. The income quintile ratio, which shows how many times the disposable income of the fifth quintile is compared to the first quintile, was 5.07 times in the third quarter, down 0.62 points year-on-year, marking the lowest level since the second quarter of 2020. This indicates that the income gap has narrowed somewhat. However, the Ministry of Economy and Finance cautioned, “Quarterly household income figures are subject to seasonality and volatility, so care should be taken when analyzing income distribution using the quintile ratio.”

The government stated, “Total income has increased for nine consecutive quarters, and all income quintiles from the first to the fifth have seen growth. To ensure the continued virtuous cycle of growth and distribution, we will strengthen policy efforts such as revitalizing domestic demand and identify and pursue policy tasks to strengthen the social safety net as part of our economic growth strategy.”