CASUAL KOREAN LIFESTYLE RESHAPES DEMAND.

The South Korean work week is getting shorter and consumption patterns are changing as the average household focuses more on recreational activities. The five-day work week is boosting the amount of leisure time available to the adults, thus allowing them to dedicate more energy and resources to hobbies and entertainment.

The increase in leisure time is contributing to a transition in consumer preferences for clothing, food, and household goods. A report recently released by MPI, a TXile and clothing research firm located in Seoul, casual wear has come to represent an increasingly important share of total clothing sales in recent years.

According to the report, casual wear accounted for 52.6 percent of the South Korean apparel market during 2003, up from 50.5 percent a year earlier. Sales of accessories also expanded to represent 12.2 percent of the market. The overall value of clothing sales is projected to rise this year to over US$16.7 billion.

Apparel items that are losing market share include mens and womens suits as well as underwear. The MPI report projects that their respective market share will drop to 12.8 percent, 7.3 percent, and 6.9 percent respectively in 2004.

South Koreans are increasingly health oriented and that is driving up demand for exercise and sports equipment. In the main urban centers, sales of exercise equipment should experience double-digit growth this year. Expenditure on health clubs will increase more slowly, but sales gains in excess of 5 percent year-on-year should emerge by the second half of 2004.

Food and beverage preferences are being reshaped by increasing health consciousness on the part of Korean consumers. That is contributing to modest but steady growth in fresh produce.. Produce sales should experience year-on-year growth approaching 5 percent during the second quarter of this year, with higher peaks likely during the second half.

Concerns related to North Korean nuclear advances and the soft job market in South Korea contributed to a slump in consumer spending over the past 18 months. Sustainable growth in retail sales should emerge by the middle of this year as South Koreas industrial activity comes back to life and more jobs are created.

Economic factors favor a rebound in household consumption this year. The target interbank interest rate recently reached a record low of 3.75 percent, and there is not likely to be a substantial upturn this year. As 2004 progresses, increasingly attractive financing terms, coupled with bargain prices on imported goods, should bring Korean consumers back into the showrooms. Assuming that tensions between the United States and North Korea can be diffused this year, South Korean retail sales are likely to come back strong.