South Korea’s middle class continues to experience a prolonged decline in consumer spending, even as low- and high-income groups show signs of recovery, according to a new report from the Korea Chamber of Commerce and Industry (KCCI) released Monday.

The study, titled “Recent Consumption Trends and Implications,” analysed real household expenditures across different income brackets, using 2019 (pre-pandemic) as a benchmark. The findings indicate that spending has weakened primarily in the second and third income quintiles – representing the core of the middle class.

In contrast, low-income households have maintained or even increased their spending due to government assistance, while high-income earners have seen a faster recovery thanks to asset growth and income normalisation.

Slower Consumption Recovery Compared to the Financial Crisis

The report compared household spending recovery trends following the 2008 Global Financial Crisis and the 2020 Covid-19 pandemic.

During the financial crisis, household spending declined by 2.51 per cent in 2008–2009 but fully rebounded by 2010.

After Covid-19, spending fell 2.82 per cent in 2020 compared to 2019 and remained below pre-pandemic levels for more than three years, only showing signs of improvement in 2023.

Even in the post-pandemic endemic era, recovery has remained uneven due to high interest rates, inflation, and shifting consumer behaviour.

Middle class under growing financial pressure

The study found that disposable income among middle-income households has been significantly constrained by rising household debt and interest payments, reducing their ability to spend.

The marginal propensity to consume (MPC) – the proportion of additional income spent rather than saved – has fallen sharply in the middle class. The second quintile’s MPC dropped from 90.8 in 2019 to 81.8 in 2024, while the third quintile also failed to recover to pre-pandemic levels.

“While low-income households have maintained spending with government support and high-income earners have recovered due to rising assets and income, the prolonged stagnation of middle-class consumption is now impacting the broader domestic economy,” the KCCI stated.

Sectoral spending trends and policy recommendations

A sector-by-sector analysis of consumer behaviour from 2020 to 2024 found that:

• Clothing and footwear, personal items, and insurance spending remained weak, struggling to recover post-pandemic.
• Food, beverages, and household services, which saw a spike in demand during the pandemic, have declined since 2022, now trailing pre-pandemic levels.

To revitalise consumer spending, the report suggests:

• Targeted policies to encourage middle-class consumption
• Debt relief measures to ease financial burdens
• Support for small business owners
• The KCCI emphasised the importance of stabilising domestic demand, stating, “Given South Korea’s export-dependent economy and the shifting global trade environment, securing a strong domestic consumption base is essential.”

This story was originally published by M H Lee, via Korea Bizwire.