Seoul: One in four South Korean households spent more than their disposable income in the fourth quarter, marking the highest share of deficit-running households in six years, according to government data. The ratio for the October-December period came to 25 percent, the highest since the fourth quarter of 2019, when it was recorded at 26.2 percent, as per data from the Ministry of Data and Statistics. A deficit household is identified as one where consumption spending surpasses disposable income.

According to Yonhap News Agency, market analysts have attributed the financial strain on households to prolonged high inflation, with spending outpacing income growth. They highlighted that deficit-running households might lack surplus funds for investment, potentially missing out on gains in asset values despite a recent rally in the stock market. A government official noted that the fourth-quarter increase might have been influenced by temporary factors, such as higher expenditure on durable goods and seasonal spending related to the Chuseok holiday in October.

The data also highlighted disparities across income levels, with the proportion of deficit-running households generally rising as income levels decline. Among the lowest income quintile, 58.7 percent of households ran deficits in the fourth quarter, up 1.8 percentage points from a year earlier. The ratio for the second income quintile increased by 1.3 percentage points to 22.4 percent. The third quintile saw a 0.1 percentage-point rise to 20.1 percent, while the fourth quintile recorded a 2.9 percentage points increase to 16.2 percent. In contrast, the share among households in the highest income quintile fell by 0.9 percentage points to 7.3 percent.

Rising interest burdens further exacerbated the financial pressure on households. Average monthly interest expenses per household amounted to 134,000 won (US$92) in the fourth quarter, an 11 percent rise from the previous year. Analysts cautioned that higher interest costs are likely to further strain lower-income households and negatively impact their perception of economic conditions.