Economic slowdown, rise in oil prices and increasing household debts led to a drop in the retail sales in South Korea during June 2008.

According to the data released by the government on July 10, 2008, the annual sales in major departmental stores of South Korea in June 2008 slumped over a month earlier, as reported by REUTERS.

The Ministry of Strategy and Finance released data which highlighted that the South Korean departmental stores sales rose by 10.1% in June 2008 over the same month last year against a YOY increase of 11.3% in May 2008. Besides, the Ministry highlighted that retail sales at three major discount chain stores plunged by 1.6% in June 2008 against the same month last year, while it gained by 4.9% in May 2008.

The fall in the retail sales of departmental stores in South Korea was largely due to a slowdown in the country’s economy that reduced the domestic demand. Moreover, the economic growth in South Korea was on slower side; as a result, business and consumer spending remained low, impacting the retail sales.

Moreover, the consumer confidence in South Korea remained low since December 2004 due to slowdown in the country’s economy. Consequently, the retail sales fell sharply during June 2008.

Another factor that pushed the retail sales in South Korea down was a record rise in oil prices that made Korean households pessimistic. Even the household debts increased to a record high during the first quarter of 2008 because people borrowed money to pay their credit card bills and to buy new homes, leading to lower spending on retail products.

In addition, the departmental stores in South Korea ran more promotions in May 2008 than June 2008 to attract consumers. As a result, the retail sales at major departmental stores remained sluggish during June 2008 over May 2008.

According to a Research Analyst at RNCOS, “Retail sales in South Korea in June 2008 significantly dropped owing to low consumer expenditure. To bring the retail sales back on track, both industry players and departmental stores are required to make collective efforts and introduce new schemes and give discounts. These will help in attracting consumers back to market despite heavy pressure from rising oil prices.”

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