Household income growth slashes in half after Sewol disaster

Growth rates of household income and expenditures plunged en masse during the second quarter of this year due to sluggish domestic consumption caused by the Sewol disaster. However, income disparity is found to have improved, with income distribution indicators falling to the lowest level in more than 10 years since 2003.

According to the "Household economy trend in the second quarter" released on Friday by Statistics Korea, the average monthly income of households with two members or more nationwide came to 4.15 million won (4,080 U.S. dollars), up 2.8 percent year-on-year. The growth rate lags far behind the gain (5.0 percent) in the first quarter of this year. Adjusted for inflation, the real income growth rate only amounted to 1.1 percent.

The income growth rate slowed because the growth paces of salary and business income slumped amid deteriorating consumer sentiment caused by the Sewol tragedy. Business income gained by a meager 0.7 percent in the second quarter year-on-year, plunging from the first quarter`s growth rate of 3.2 percent.

Over the same period, the average monthly household expenditure amounted to 3.25 million won (3,190 dollars), up 2.9 percent from last year, but the margin of expansion declined from the first quarter (4.5 percent). Other educational expenses including field trips tumbled by 26.0 percent due to cancellations of field trips by various schools following the Sewol disaster, while spending on domestic group tours also fell by 18.0 percent. Spending on foodstuffs increased by 2.0 percent year-on-year led by a gain in the meat category (14.3 percent) due to a price hike of livestock products, while housing expense also rose 5.7 percent due to a growing number of households on monthly rent.