By Lee Hyo-sik
Staff Reporter
Households' spending on food against their total expenditure hit an eight-year high this year as prices of rice and other essential food items rose.
The Bank of Korea (BOK) reported Tuesday that household expenditure on cigarettes and alcohol fell to the lowest level in 11 years, indicating consumers tightened their belts on non-essential products.
The central bank said the nation's Engle's Coefficient, the portion of money spent on food relative to total household expenses, reached 13 percent from January through September, up from 12.3 percent during the same period last year. The ratio is the highest since 2000, when it stood at 13.4 percent.
The index usually drops when incomes rise because families tend to continue spending the same amount of money on food items. Instead, households spend more on cultural and other activities to improve their quality of life, lowering the percentage of food consumption compared to total expenditure. But it soared this year due to slower income growth and surging costs of food items.
Household expenditure totaled 408.8 trillion won from January to September, up 2.4 percent from the same period last year.
But families here spent a combined 53 trillion won on groceries, 7.8 percent more than the 49.1 trillion won of a year earlier.
"Many households here tightened their purse strings to cope with the ongoing economic downturn, spending mostly on food and other essential items, raising the Engel's Coefficient," Korea Development Institute (KDI) senior fellow Kim Hyeon-wook said.
"Rising food costs also forced consumers to spend more on groceries, further pushing up the coefficient. But I think it is only a temporary trend."
Kim said that in 2010, household income will rise at a much faster pace on improving job market conditions.
leehs@koreatimes.co.kr
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