Hopes rise for end to longest slump in Korea's domestic demand

Shoppers are seen at a traditional market in Dongdaemun District, Seoul, Sunday. Yonhap

By Lee Kyung-min

• Published Aug 4, 2025 7:00 AM KST

Expectations are growing that Korea's weak domestic consumption will bottom out in the third quarter, as retail sales — one of the key barometers of consumer spending — are beginning to show signs of a rebound after remaining in negative territory for a record-long period, according to data released Sunday by Statistics Korea.

Adding to the optimism is the Lee Jae Myung administration’s drive to boost spending through a cash equivalent handout of at least 150,000 won ($115) per person.

According to Statistics Korea, the country's retail sales index for the April-June period declined 0.2 percent compared to the previous year.

The year-on-year decline was the smallest since the slump in retail sales began in earnest in the second quarter of 2022, following the COVID-19 pandemic.

The 13 consecutive quarters of decline mark the longest period of contraction since the statistics agency began compiling related data in 1995.

The latest quarterly drop of 0.2 percent is considered relatively flat, especially compared to the steeper declines of 1 percent to 3 percent recorded between 2023 and 2024. The decline was as sharp as 3.1 percent in the second quarter of 2024.

Meanwhile, service sector output, another key barometer of consumer activity, grew 1.4 percent during the April-June period, marking the strongest growth since the 1.6 percent increase seen a year earlier.

The improvement in consumer sentiment is also borne out by the Consumer Composite Sentiment Index (CCSI), which shows increasingly clear signs of recovery.

The index plunged to 88.2 last December amid former President Yoon Suk Yeol’s martial law declaration, but has since recovered.

It hit 93.4 in March, followed by 93.8 in April, 101.8 in May, 108.7 in June and 110.8 in July.

The July figure is the highest in four years, when it hit 111.1 in June 2021.

Credit card spending is also showing signs of recovery. According to the Credit Finance Association, credit card spending in the second quarter reached 313 trillion won, up 3.7 percent from the previous year.

Separate data from the statistics agency showed credit card spending in the first week of July was up 12.6 percent from the previous year. The second week posted a spending increase of 3.7 percent from a year earlier.

According to a survey of 119 members of the country’s supermarket cooperatives, over 90 percent of respondents said their sales increased from July 21 to 27 compared to the previous week.