Fashion industry on edge as stock market slump threatens consumer spending

South Korea's fashion industry, which began recovering in the second half of last year, is watching nervously as a weakening stock market threatens to dampen consumer sentiment. The sector had benefited from a buoyant market that drove purchases of high-end clothing, and industry players fear a prolonged downturn could reverse those gains.

Concern is mounting within the fashion industry over the potential impact of recent Kospi and Kosdaq weakness on consumer spending, industry officials said Wednesday. The Kospi triggered sell-side sidecars 16 times and circuit breakers six times between the start of the year and Tuesday, with the downward trend continuing since.

Unlike food and daily necessities, clothing is a discretionary item — something consumers buy when finances allow and cut back on when economic conditions deteriorate. "When the stock market is doing well, high-end clothing and luxury goods benefit, but when it does poorly, the opposite happens," one industry official said. "Consumer sentiment could turn negative again."

A survey by the Korea Federation of Textile Industries of 3,500 consumers nationwide on fashion spending prospects for the summer months of June through August found the Fashion Consumer Outlook Index stood at 99.5. A reading below 100 signals that a majority of respondents expect spending to decline.

Among consumers who planned to cut back on clothing purchases, 40.1 percent cited rising prices and the burden of living costs as their primary reason. That was followed by changes in income or available funds (21.1 percent), higher fashion product prices (12.5 percent), and concerns about economic conditions and weakening consumer sentiment (12.2 percent).

For a fashion industry that had been riding a wave of stock market gains and recovering consumer confidence, the shift represents a clear headwind. The Ministry of Statistics reported that the department store clothing sales index for May rose 12.6 percent from the previous month to 180.9 (base year 2020=100). Clothing sales also climbed sharply at discount marts, up 27.0 percent, and at specialty retailers, up 10.6 percent.

The export outlook is also clouded. Apparel exports totaled $834 million in the January-to-May period, up 10.9 percent from the same period a year earlier, according to the Korea Customs Service. May alone saw exports of $164 million, a 3.4 percent decline from a year earlier, with sluggish economic conditions in China and other markets posing a potential drag.