Even in the First Quarter, 'Stingy Spending'... Real Consumption Turns Negative for the First Time in 7 Quarters

[Financial News]  In the first quarter of this year, household consumption expenditure showed the largest decline since the COVID-19 pandemic.
Low-income households saw a significant increase in spending due to high inflation, while high-income households reduced their consumption of durable and semi-durable goods.
Despite the income growth trend, economic uncertainty, such as the state of emergency and U.S. tariff policies, appears to have intensified the contraction in consumer sentiment.
According to the '2025 First Quarter Household Trends' released by Statistics Korea on the 29th, the average monthly consumption expenditure per household in the first quarter of this year was 2.95 million won, an increase of 1.4% from a year ago.
Spending increased in housing, water, and utilities (5.8%), and food and non-alcoholic beverages (2.6%), but decreased in transportation (-3.7%) and clothing and footwear (-4.7%).
Real consumption expenditure, which considers price levels, decreased by 0.7%.
Real consumption expenditure, which removes price fluctuations from consumption expenditure, is an indicator that reveals the actual consumption activities of households. The decrease in real consumption expenditure is the largest since the second quarter of 2023 and the largest decline since the fourth quarter of 2020 (-2.8%) during the pandemic.
Consumption expenditure, including price fluctuations, was recorded at an average of 2.95 million won per month, showing a 1.4% increase over the same period.
When looking at household consumption expenditure by income quintile, low-income households showed a larger increase in consumption expenditure despite a decrease in income.
Households in the first quintile, with income in the bottom 20%, saw significant increases in spending in areas such as alcoholic beverages and tobacco (10.8%), education (28.2%), and food and lodging (8.0%), resulting in a 3.6% increase in consumption expenditure.
Households in the fifth quintile, with income in the top 20%, saw a 2.1% increase in consumption expenditure. While spending increased in entertainment and culture (11.5%) and health (11.2%), it decreased in transportation (-7.6%) and clothing and footwear (-3.3%).
Lee Ji-eun, head of the Household Income and Expenditure Trends Division at Statistics Korea, explained, "Although the income of first quintile households decreased, necessary spending continued, leading to an increase in consumption expenditure, while the fifth quintile households reduced some durable and semi-durable goods consumption, such as car purchases," adding, "The consumer sentiment index has not exceeded 100 since December last year, which seems to have had an impact." A consumer sentiment index below 100 indicates pessimistic consumer sentiment.
The average monthly income increased slightly. It was 5.351 million won in the first quarter, a 4.5% increase from a year ago. Real income also rose by 2.3%.
Labor income and business income rose by 3.7% and 3.0%, respectively, and transfer income also increased by 7.5%. In particular, as the number of public pension recipients, including the National Pension, expanded, public transfer income rose by 9.9%.


spring@fnnews.com Lee Bo-mi Reporter