Services Industry Contracts by Record Margin

By Lee Hyo-sik
Staff Reporter
South Korea’s service industry output dropped by 1.7 percent in August from a year ago, the largest monthly decline since January 2000 when the data first started to be collected, as retail sales contracted for the 19th consecutive month.




According to the National Statistical Office (NSO) Wednesday, the prolonged sluggish domestic consumption led consumers to refrain further from spending money in real estate, education, restaurants and financial services.
The service industry previously saw its output fall by 1.4 percent in July from the same period last year, following a 0.8 percent growth in June.

Total retail sales of small shops, department stores and restaurants dropped by 4.6 percent in August for the 19th monthly decline as food sales decreased by 8.2 percent and home shopping sales by 7.5 percent over a year ago.

Sales of food and tobacco contracted 10.2 percent and construction materials by 5.5 percent as sales in the wholesale sector saw its business drop by 0.7 percent in August, following a brief increase of 0.4 percent in July.

As a whole, the combined output of retail and wholesale sectors, a barometer of consumer spending, shrank 2.2 percent in August from a year ago following a 0.3 percent drop in July.

Education services output also dipped 9.3 percent in August from a year ago, the 10th consecutive monthly drop, after falling 9.6 percent in July.

The real estate and leasing sectors fell by 9.6 percent to mark the 11th month of decline, while the finance and insurance sector dropped into negative territory as its output decreased by 3.6 percent due to a slump in domestic stock markets and the credit card industry.

Car sales declined 2 percent in August from a year ago due to record-high gasoline and diesel prices.

Despite the summer vacation in August, lodging and restaurant businesses each contracted by 12.3 percent and 5.2 percent, respectively, from a year ago as domestic tourists spent less on their vacations, while hotel business expanded its output by 18.5 percent, thanks to an increase in foreign tourists.

Output of entertainment, culture and sports-related services sectors declined by 5 percent in August for the sixth straight month, as the nation’s flourishing movie industry saw their business shrink by 1 percent for the first time in the last 12 months as well as revenues of theme parks, which fell by 8.1 percent over the past year.

In the meantime, business supporting services such as computer operations and data processing grew 0.2 percent in August following a 2.6 percent pick up in July, while transportation expanded by 8.6 percent and telecommunication expanded by 2.2 percent in August from a year ago.

NSO officials said that the service industry has not yet been able to pull itself out of the slump, adding that the industry experienced a relatively larger drop in August over the same month last year as the services sector did not benefit from brisk sales associated with the Chusok holiday, which fell in late September.

Amid a slowdown in exports, South Korea is unlikely to meet its economic growth forecast of 5 percent for this year since the services sector, which accounts for 57 percent of the gross domestic product, has not shown the ability to power the domestic economy, Seoul economists noted.

leehs@koreatimes.co.kr