November 16, 2012 / 3:00 AM / 5 years ago

S.Korea Q3 disposable income growth speeds up, consumption slows

SEOUL, Nov 16 (Reuters) - South Korean households’ disposable income grew by the fastest annual pace in more than eight years last quarter but their consumption fell, highlighting the fragility of consumer confidence amid uncertain global conditions.

The average South Korean household saw disposable income rise by a real 4.6 percent in the July-September period over a year earlier, Statistics Korea data showed on Friday, marking the fastest growth on record since the first quarter of 2004.

The annual growth in disposable income - total income less spending on non-consumption purposes, such as tax - accelerated for a sixth consecutive quarter since posting a decline of 0.9 percent in the first quarter of 2011.

Despite the increased disposable income, South Korean households cut spending for consumption by a real 0.7 percent in the September quarter over a year earlier.

The robust income growth in real terms occurred as annual consumer price inflation eased to a more than 12-year low of 1.6 percent in the third quarter from 2.4 percent in the second quarter, while employment posted solid growth.

Despite this benign outlook, a key consumer sentiment index from the central bank’s monthly surveys stood below 100 demarcating optimism from pessimism for a third consecutive month in October, compared with an average of 100.75 for the preceding one-year period.

South Korea’s economy is especially vulnerable to global trade and capital flows not simply because of its heavy reliance on exporting companies but because of the openness of its financial markets to global investors.

Both the central bank and the government have said Asia’s fourth-largest economy should start to recover from the current quarter after posting growth of just 1.6 percent in the July-September period year-on-year. (Reporting By Se Young Lee; Editing by Choonsik Yoo and Eric Meijer)

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