A vendor sits before a pile of napa cabbages at a traditional market in Seoul, June 3. Yonhap

Private spending in Korea remains in a protracted slump, raising concerns that it may disrupt the country's economic recovery in the second half of this year by offsetting the positive economic effects of robust exports.

Retail sales, a gauge of private spending, slipped 0.2 percent in May from a month earlier, according to Statistics Korea.

Beginning in the latter half of 2023, retail sales displayed a string of month-on-month decreases. The only exception was in March of this year, when it gained 1.6 percent.

Separate data from Statistics Korea also revealed that the cyclical component of the composite coincident index, which measures current economic conditions, declined by 0.6 percentage point month-on-month to 98.8 in May.

A reading below 100 indicates a country's economy is in a downturn. A reading above 100 indicates an economic upturn.

The May figure was noteworthy as it marked the steepest fall since May 2020 when the index dropped 1 percentage point from the previous month in the middle of the coronavirus pandemic.

Exports, a crucial engine of Korea's economic growth alongside private spending, extended their year-on-year gains for the eighth consecutive month in May, rising by 11.7 percent to $58.1 billion.

"Under the circumstances, economic growth can be seen as lacking in terms of private spending," Joo Won, director of the Hyundai Research Institute said.

He pointed out that Korea's economy in the first quarter grew 1.3 percent from the previous three months and displayed the sharpest expansion in more than two years.

"An economic rebound may not gain momentum quickly as long as private spending continues to lag," Joo said.

Jung Kyu-chul, a senior fellow at Korea Development Institute's (KDI) Office of Macroeconomic Analysis and Forecasting, also voiced concerns over disrupted growth.

"The growth rate was unusually high in the first quarter, but is expected to decrease to zero percent in the second quarter," Jung said.

To address weak private spending, Jung suggested that the Bank of Korea (BOK) should consider shifting away from its high-rate policy, especially as consumer inflation is easing.

The BOK has kept its benchmark interest rate at 3.5 percent since January 2023, the highest level since December 2008.

Asking not to be named, an analyst a private economic institute said the BOK's rate cuts may only have a "limited impact on boosting private spending."

He noted that prices of grocery items, such as fruits and vegetables, remain high even when consumer inflation is softening

Consumer prices grew at a slower pace for the second straight month, decreasing from 2.9 percent year-on-year in April to 2.7 percent year-on-year in May. This marks the second consecutive month that inflation has remained below 3 percent.

On the other hand, prices of agricultural products spiked 19 percent, which accounted for a 0.69 percentage point increase in overall inflation.