The KOSPI index crossed the ‘7,000 level’ on the 6th, and first-quarter economic growth also delivered a ‘surprise’, yet the overall temperature felt in the economy is barely rising. A semiconductor boom fueled by the artificial intelligence (AI) investment craze is lifting the stock market and corporate profits, but as the semiconductor ‘trickle-down effect’ fails to spread across the broader economy, the gap between the ‘headline economy’ and the ‘perceived economy’ is widening. In the KOSPI market as well, there were more decliners than gainers. With consumption dampened by aging, a trend of plowing gains back into stocks, and worsening finances among vulnerable groups, observers note that the lives of ordinary people remain strained.

To begin with, the semiconductor industry leading the market rally does not generate a large ‘trickle-down effect’. Because semiconductors and similar technology-intensive industries do not readily translate corporate profits into robust hiring, they create limited spillovers. As of March, employment in manufacturing and construction, both sensitive to the economic cycle, has declined for 21 and 23 consecutive months, respectively.

Excluding semiconductors, even on this ‘red-hot market’ day, 679 stocks fell on the KOSPI, more than triple the number of gainers (200). Although the KOSPI rose, the warmth did not spread across the market.

In particular, the number of ‘vacancies’ that are currently open and could be filled within a month has been decreasing for more than two years. Profits at domestically listed companies, centered on semiconductors, keep rising, yet demand to hire new workers has weakened.

Real wage growth has also remained below 1% ever since it last reached 2% in 2021, meaning incomes have not grown much compared with corporate profits or stock prices, another reason perceived conditions feel cold.

On top of this, structural shifts in Korean society such as aging and low growth are also cited. As aging accelerates, the number of retired·near-retirement households that prioritize saving and asset preservation over immediate consumption has increased, even when assets rise.

Lee Jin-kyung, a researcher at Shinhan Investment & Securities, said in a report that day, “In an environment where income was rising quickly, asset-price increases were enough to spur consumer sentiment, but with growth slowing, the capacity to consume itself has been structurally reduced.”

Another factor is that during a sustained stock uptrend, investors have turned to ‘additional buying (adding to positions)’ rather than consumption. The researcher said, “Rather than using stock gains for consumption, investors are likely holding balances or making additional purchases. Unless gains are realized, the link to higher consumption is bound to be limited.” The recent rise in equity allocations via pensions is another reason gains cannot be realized in the short term.

Cash buffers appear to be deteriorating especially among ordinary people and vulnerable groups. According to the Credit Finance Association last month, outstanding card loans at nine major card companies stood at about 43 trillion won at end-March, rising for three straight months to a record high. Card loans, which lower-credit borrowers often use for living expenses, tend to increase as the real economy slows. The delinquency rate on loans at domestic banks was 0.62% as of February, the highest in nine months.

Lee Jung-hee, a professor in the Department of Economics at Chung-Ang University, said, “For domestic demand to recover, consumption needs to increase, but only limited categories of spending are growing, so the public's sense of economic growth remains low. The government needs to consider how to spread the warmth of KOSPI growth across industries.”