Spending on Daily Necessities Falling to 10-Year Low

Kim Shin-hyung, 38, a Seoul-based salaried worker, complains about his shrinking monthly allowance these days. Citing the ongoing economic downturn, his wife, a middle school teacher, told Kim that they should slash spending and save more.

"I understand what my wife, who manages our household finance, is trying to do. But I would still like to hang out and drink with friends and colleagues at night as much as I want to. But with less money in my pocket, I have no choice but to reduce the number of drinking bouts and come straight home from work more often," he lamented.

Kim then said he and his wife have been getting paid on time. But they expect things to turn from bad to worse down the road, with many businesses downsizing their workforce and sending thousands of workers onto the street.

"A year ago, my wife got me a new suit for spring at a department store and I bought her a nice dress. But this time, I do not think we will be buying new clothes. Additionally, we used to eat out at least four times a week, spending more than 50,000 won each time. But to save money, my wife goes to the grocery store more often these days and cooks at home, even though she is tired after a long day of teaching," he said.

Like Kim and his wife, many Koreans are slashing spending on clothes, food and other daily essentials to cope with slower income growth and falling asset values amid the ongoing worldwide economic slowdown. Consumption of automobiles and other durable goods has plunged at a much steeper pace.

According to the National Statistical Office (NSO) Monday, household spending on clothes, food, housing and other daily necessities dropped 7 percent in December from a year earlier, the largest decrease since the 1997-98 Asian financial crisis.

Sales of clothes and other textile products fell 18.2 percent from a year ago, the biggest decline since 2006, when the statistical office began compiling data. Normally, consumers buy more clothes toward the year's end in preparation for winter, peaking in December. Such was not the case last year, as families cut spending to deal with worsening economic conditions.

Sales of shoes and bags dropped 11.5 percent, while revenues earned by restaurants and other eateries shrank 5.6 percent in the fourth quarter of 2008 from a year ago, the largest decline since 1999.

A drop in restaurant revenue indicates that more people refrained from dining out and instead, ate at home in a bid to save money.

"Spending on clothes and other daily necessities has fallen at a faster clip than initially expected, showing that consumers are increasingly concerned about their income flow and job security. The sluggish private consumption will likely deepen further for the foreseeable future, as economic conditions will turn from bad to worse," an NSO official said.

Additionally, makers of automobiles and other durable goods are suffering even more from stagnant private consumption. Auto production went down 48.4 percent last month from a year earlier, as consumers became reluctant to spend big bucks on the big-ticket item. It was the largest output decrease since July 2006, when operations were halted by strikes.