With recession-type surplus emerging, South Korea may usher in retaliatory consumption!

It is reported that last year, due to the spread of the new coronavirus , South Korea's household surplus hit a record high.

Although the government used disaster relief funds to turn household incomes positive, economic entities quickly reduced spending during the crisis, resulting in a phenomenon called "recessionary surpluses."

According to the results of the household trend survey conducted by the National Statistical Office of Korea on the 21st , the surplus rate of households across the country last year was 32.9% in the first quarter , 32.3% in the second quarter, 30.9% in the third quarter , and 30.4% in the fourth quarter , all exceeding 30%.

There have been only five times in the Household Trends Survey, which has been conducted since 2003, that households have posted a quarterly surplus of 30 percent or more , and all but one of those occurred in the last year, with the exception of the 30.3 percent in the fourth quarter of 2016 .

The surplus rate refers to the ratio of the remaining funds in the household income after deducting consumption and expenditure . The amount of income after deducting non-consumption expenditures (such as taxes, pensions, social insurance premiums and interest expenses) is disposable income . After deducting daily food , clothing and housing expenses, it will become a surplus . The surplus rate is the proportion of surplus in disposable income .

Last year , the increase in household surplus was not so much the result of "extra income" as it was the result of "non-use" or "non- consumption ", that is, the result of a recessionary surplus.

In a recent report titled “Comparison of Consumer Expenditure Patterns during Past Economic Crises and the Pandemic Spread,” Sangmyung University professor Yoo Kyung-won explained , “ When a crisis occurs , the reduction in household consumption is more severe than the reduction in income. ”

The greater the fear of income reduction, the greater the scale of consumer spending. The reduction in mechanical spending due to the current income reduction and the increase in the need for reserve savings to cope with the instability of future income have further reduced spending , which is particularly prominent when the surplus rate hit the highest level in the first quarter of last year.

Compared with previous economic crises, the average household income increased during the pandemic , and the government's general and selective disaster assistance funds may have also had a significant impact. In other words, although the average household income increased, the expenditure decreased significantly, which increased the surplus rate.

Based on historical experience, the surplus stored during a crisis often leads to explosive consumption after the crisis is overcome , which is the so-called revenge consumption.

Professor Liu Qingyuan said: "In the process of responding to the epidemic , the increase in liquidity has caused the asset market to overheat , and the economic trend will change according to the consumption and savings shown. The scale of consumer spending will expand, and economic fluctuations may also increase sharply. "

South Korea

Consumption

epidemic