U.S. Stock Market Crash Consumption Impact: BOK Warns of 1.7pp Spending Drop
BOK warns that a 30% U.S. stock market crash could slash consumer spending by 1.7pp, potentially causing serious setbacks for the South Korean economy.
A dot-com style crash isn't just a Wall Street nightmare—it's a direct threat to global consumption. The Bank of Korea (BOK) warned Friday that a sharp correction in U.S. equities could trigger a massive contraction in consumer spending.
Measuring U.S. Stock Market Crash Consumption Impact
According to a report by the Bank of Korea, a 10% decline in U.S. stock prices would shave off approximately 0.3 percentage point from annual consumption growth. However, in a worst-case scenario where stocks plunge by 30%—reminiscent of the 2000 dot-com bust—growth could crater by as much as 1.7 percentage points.
Vulnerability to Asset and Income Inequality
The BOK noted that U.S. households are facing purchasing power risks from persistent inflation and changing labor market conditions. Consumption has become heavily dependent on the spending habits of high-income households and their equity portfolios. This widening inequality makes the overall economy more vulnerable to asset price shocks.
For South Korea, the stakes are high. The local economy's health is closely intertwined with U.S. Artificial Intelligence (AI) investment and American consumer demand. Any significant cooling in the U.S. would likely lead to serious setbacks for Korean exports and overall growth.
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