South Korea’s retail sales YoY growth for December 2025 came in at 0.60%, below the 1.30% estimate and down from 1.40% in November, according to the latest data from the Sigmanomics database[1]. This slowdown reflects a moderation in consumer demand amid tighter financial conditions and external uncertainties. The current reading remains positive but well below the 12-month average of 0.20%, signaling fragile momentum in the retail sector.

Drivers this month

• Consumer caution amid rising inflation and interest rates.
• Supply chain normalization easing previous inventory buildups.
• Geopolitical tensions in the region dampening sentiment.

Policy pulse

The retail sales growth is below the Bank of Korea’s inflation target zone, suggesting limited consumer pricing power and potential pressure on monetary policy to remain accommodative or pause tightening.

Market lens

Following the release, the KRW/USD currency pair showed a slight depreciation of 0.10%, while the KOSPI index remained flat, reflecting cautious investor sentiment amid mixed economic signals.

Retail sales are a key macroeconomic indicator reflecting household consumption, which accounts for roughly 55% of South Korea’s GDP. The 0.60% YoY growth in December contrasts with a volatile trend over the past year, including a sharp dip to -2.60% in April 2025 and a recovery to 1.40% in November. This volatility aligns with fluctuations in inflation, wage growth, and employment.

Monetary Policy & Financial Conditions

The Bank of Korea has gradually raised policy rates from 1.25% in early 2025 to 2.50% by November, aiming to curb inflation that peaked near 4.50% YoY mid-year. Higher borrowing costs have constrained consumer credit and durable goods purchases, contributing to the retail slowdown.

Fiscal Policy & Government Budget

Fiscal stimulus has been moderate, focusing on targeted support for low-income households and SMEs. The government’s budget remains cautious, with a deficit target of 3.20% of GDP for 2025, limiting broad-based consumption incentives.

External Shocks & Geopolitical Risks

Heightened tensions on the Korean Peninsula and trade uncertainties with China and the US have increased risk premiums. These factors have dampened consumer confidence and disrupted export-driven income growth, indirectly affecting retail sales.

Key monthly contributors include subdued spending on non-essential goods and a slight uptick in food and beverage sales. The seasonal holiday period provided some support but was insufficient to offset broader headwinds.

Market lens

Immediate reaction: The KOSPI index showed minimal movement, while the KRW depreciated slightly against the USD, reflecting investor caution. Short-term bond yields edged up by 3 basis points, signaling modest inflation concerns.

Looking ahead, retail sales growth in South Korea faces a mix of supportive and constraining factors. The Bank of Korea’s monetary policy stance and global economic conditions will be critical in shaping consumer demand.

Bullish scenario (20% probability)

• Inflation eases faster than expected, allowing rate cuts by mid-2026.
• Fiscal stimulus ramps up, boosting disposable incomes.
• Geopolitical tensions ease, restoring consumer confidence.
• Retail sales rebound to 2.50%-3.00% YoY growth by Q3 2026.

Base scenario (55% probability)

• Monetary policy remains steady with gradual normalization.
• Fiscal policy stays targeted but limited in scope.
• Retail sales growth stabilizes near 1.00% YoY through 2026.
• Consumer spending remains cautious amid moderate inflation.

Bearish scenario (25% probability)

• Inflation persists above target, prompting further rate hikes.
• Geopolitical risks escalate, disrupting trade and confidence.
• Retail sales contract or stagnate, falling below 0% YoY.
• Financial markets react negatively, pressuring the KRW and equities.

South Korea’s retail sales YoY growth in December 2025 signals a cautious consumer environment amid tightening monetary policy and geopolitical uncertainty. While the sector shows resilience compared to earlier 2025 lows, the slowdown from November’s 1.40% to 0.60% underscores ongoing challenges. Policymakers face a delicate balance between controlling inflation and supporting growth. Structural trends such as aging demographics and digital commerce adoption will continue to reshape retail dynamics over the long term.

Investors and policymakers should monitor inflation trajectories, wage growth, and external risks closely. The retail sector’s performance will remain a bellwether for broader economic health in South Korea as 2026 unfolds.

Key Markets Likely to React to Retail Sales YoY

Retail sales data in South Korea typically influence equity markets, currency pairs, and credit spreads. The following five tradable symbols historically track or react to retail sales trends, offering insights into market sentiment and economic outlook:

• KOSPI – South Korea’s benchmark equity index, sensitive to consumer demand shifts.
• KRWUSD – The Korean won to US dollar exchange rate, reflecting capital flows and economic confidence.
• 005930.KS – Samsung Electronics, a major consumer and export player affected by domestic spending trends.
• BTCUSD – Bitcoin, often viewed as a risk-on asset, reacts to shifts in investor risk appetite tied to economic data.
• EURKRW – Euro to Korean won, sensitive to trade and geopolitical developments impacting retail demand.

FAQ

What is South Korea’s Retail Sales YoY for December 2025?

The retail sales YoY growth was 0.60%, below the 1.30% estimate and down from 1.40% in November 2025.

How does this retail sales data impact South Korea’s economy?

The slowdown signals cautious consumer spending amid tighter monetary policy and geopolitical risks, affecting overall GDP growth prospects.

What are the key risks facing South Korea’s retail sector?

Risks include persistent inflation, further monetary tightening, geopolitical tensions, and structural demographic challenges.

Takeaway: South Korea’s retail sales growth deceleration highlights a fragile consumer backdrop amid tightening financial conditions and external uncertainties. Policymakers and investors must navigate a complex environment balancing inflation control with growth support.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.

Updated 12/4/25