Retail sales post steepest fall in 21 years amid prolonged economic downturn

A shop remains closed in Myeong-dong, Seoul's iconic shopping and tourist district, Dec. 29. Yonhap

By Lee Kyung-min

• Published Feb 3, 2025 3:40 PM KST
• Updated Feb 3, 2025 3:52 PM KST

Retail sales fell 2.2 percent in 2024 amid the prolonged economic downturn in the postpandemic years of rapid monetary tightening and high borrowing costs, which hit consumer sentiment hard, Statistics Korea said on Monday.

This was the sharpest drop in 21 years since the 2003 credit card crisis when retail sales sank 3.2 percent. The figure peaked at 5.8 percent in 2021 but has since been on a downtrend for the past three years — the longest period of decline since the agency began compiling data in 1995.

Further tightening the already stagnant consumer sentiment is the tragic Dec. 29 Jeju Air plane crash and President Yoon Suk Yeol’s impeachment.

Statistics Korea said sales of consumer goods took a dive across the board last year.

Semidurables, such as clothes, dropped 3.7 percent from 2023. Durable goods including cars dropped 3.1 percent. Nondurables such as food fell 1.4 percent.

In December alone, retail sales slid 0.6 percent, despite sales of nondurable goods inching up 1 percent. Sales of durables plunged 4.1 percent, while semidurable goods ticked down 0.6 percent.

The December figures were on a four-month downtrend — the longest period of weakness in domestic consumption since September.

Meanwhile, overall industrial production grew 1.7 percent in 2024 from a year earlier, underpinned by a recovery in semiconductor exports. In 2023, the year-on-year increase was 1 percent.

The 1.7 percent growth was driven by a 4.1 percent increase in manufacturing production.

Electrical equipment and raw metals production declined, unlike semiconductors and pharmaceuticals.

Exports grew 4 percent, but domestic demand dropped 2 percent.

Manufacturing decreased 2.6 percent in 2023 amid softening demand in the semiconductor market, but it rebounded to post a 4.4 percent increase last year.

Services inched up 1.4 percent last year, the smallest increase since 2020 when it dropped 2 percent.

By sector, transportation, stockpiling, finance and insurance expanded, unlike retail services.

Facilities investment was up 4.1 percent, aided by a 2.9 percent increase in semiconductor machinery and a 7.8 percent increase in transportation equipment.

Completed construction dropped 4.9 percent, the steepest decrease since 2021 when it dropped 6.7 percent. This illustrates the extended downturn in the construction industry.

In December alone, overall industrial production increased 2.3 percent from the previous month.

This ended a three-month decline since September, led by a 4.6 percent growth in manufacturing, including semiconductors and cars that surged 5.6 percent and 10.7 percent, respectively.

“Industrial production remains solid, unlike domestic spending,” a statistics agency official said. “The trend is likely to continue, pushing back the economic recovery for the time being. Retail sales and the construction sector are displaying the most laggard growth.”

It remains to be seen whether the uptick in January’s consumer sentiment as measured by the Bank of Korea (BOK) will help boost the stagnant status quo.

The BOK's consumer sentiment index came to 91.2 points, up 3 points from the previous month, aided by expectations that the martial law-triggered political wrangling would find a breakthrough.

This was a major improvement from December when it plummeted to 88.2, down 12.5 points from the previous month.

The December figure was the steepest decline since March 2020 when it slumped 18.3 points at the height of the COVID-19 pandemic.