NABO Economic Trends & Issues (Issue No. 81)
Published on 17 July 2018
Published by Macro-Economic Analysis Division of the Economic Analysis Bureau
I. Economic Trends
Although the Korean economy has recently witnessed an increase in employment, the overall economic slump appears set to continue as exports are reduced at a higher rate and investments weaken. The job market in June exhibited increased growth in the total number of new employment positions, mainly in the services sector and among senior age groups. On the other hand, exports are further deteriorating as the unit price drop continues with regard to major export products and export volume turned to a falling trend affected by weakened global trade; while plant and equipment investment and construction investment witness a contraction due to weak production in the manufacturing sector and a recession in the construction economy. The consumer price increase rate continues to remain below 1% for six consecutive months since the beginning of this year, and the won-to-dollar exchange rate dropped in June for the first time in five months, due to news of resumed US-China trade negotiations as well as expectations that the US Federal Reserve will lower its policy interest rate.
Ⅱ. Analysis of Retail Sales by Korean Retail Businesses
Recent shifts in the consumption pattern according to demographic changes and the development of IT technology have incurred a continued growth trend in online and convenience store sales, whereas sales in conventional offline stores appear stagnant. Consumers’ preferences are shifting from stores managed by mega-distribution networks to smaller stores and online shopping sites, and this same trend is witnessed in other major countries such as the US and Japan. The sectors experiencing a decline in market share and labor productivity due to shifts in consumer trends are large supermarkets and specialty retail shops. In particular, while the weight of specialty retail shops in the Korean retail sector is high, most owners were identified as small business owners. Korea needs to develop measures targeted at retailers to strengthen their competitiveness in response to shifting consumption patterns while, if needed, providing policy support mainly for small-sized businesses.
Ⅲ. Analysis of the Status of Corporate Payout Ratios in Major Economies
While the number of companies paying dividends and the total volume of dividends is on an upward trend, the average payout ratio of Korean companies (24.8%) is relatively lower than that of advanced (50.1%) and emerging (36.8%) economies. An analysis of the deciding factors of the payout ratio in 15 advanced and emerging economies from 2008 through 2018 concluded that companies that are large in terms of size and profitability and have a low ratio of capital expenditure among total assets, tend to have high payout ratios. Considering the difference in the payout ratios and changes in the factors that determine such ratios between advanced and emerging economies, there is the potential for Korean companies to witness a transformation in their payout ratios. In Korea, an expansion of the size of companies may become a factor in increasing payout ratios, but the development of payout ratio trends may vary depending on changes in ROE and investment activity.