Consumer price growth peaks over 9 years in May
The consumer price index rose 2.6% year-on-year in May, faster than a 2.3% year-on-year gain the month before, according to data compiled by Statistics Korea.
This is the fastest year-over-year increase since April 2012, when the price index rose 2.6%.
Compared to the previous month, the index rose 0.1% last month, after rising 0.2% month-on-month in April.
Core inflation, which excludes food and oil price volatility, rose 1.2% year-on-year in May.
“Prices of agricultural, livestock and fishery products have increased their earnings due to limited supply and the impact of bird flu,” senior official Eo Woon-sun told reporters. from Statistics Korea. “Petroleum product prices have also jumped (as oil prices have risen) due to last year’s low base.”
The country’s inflationary pressure remained subdued last year amid the fallout from the COVID-19 pandemic.
But inflationary pressures are mounting rapidly as the economic recovery accelerates.
Policymakers have said consumer price growth is expected to temporarily exceed the central bank’s 2% target, but annual inflation is unlikely to exceed the inflation target.
Last month, prices for agricultural, livestock and fishery products rose 12.1% year-on-year, driven by higher prices for vegetables and eggs.
Egg prices rose 45.4% year-on-year, affected by the bird flu epidemic that has ravaged chicken farms since November last year.
Prices of petroleum products rose 23.3% year-on-year, the fastest since August 2008, as petroleum prices recovered amid a global economic recovery.
Prices for personal services were up 2.5% in May from a year ago, as consumer spending increased as part of the economic recovery. Restaurant meal prices climbed 2.1% year on year.
Home prices rose 1.3% last month, the fastest year-over-year increase since November 2017 and marking the 13th consecutive month of increases. House prices have prolonged their gains despite government efforts to curb them.
Finance Minister Hong Nam-ki said that excluding the base effect, inflationary pressure appears to be stable.
“As the second half of the year approaches, the pressure on prices should ease,” Hong wrote on his Facebook page.
Last week, the Bank of Korea (BOK) revised its inflation outlook for 2021 upward to 1.8% from its previous estimate of 1.3%.
The Organization for Economic Co-operation and Development (OECD) expects Korean inflation to rise 1.8% this year, and the Korea Development Institute (KDI), a public think tank, expects the country’s consumer prices increase by 1.7%.
Policymakers have said the latest rally in inflation will be transitory, but the BOK is likely to be under heavy pressure to assess the timing of a rate hike as the economic recovery gathers pace.
In May, the BOK froze its key rate at a record high 0.5%, but BOK Governor Lee Ju-yeol issued a hawkish tone towards the possibility of a rate hike this year.
Asia’s fourth-largest economy is on a recovery path, driven by robust exports. Korea’s economy grew 1.6% in the first quarter from three months earlier, accelerating from a 1.2% quarter-on-quarter gain in the fourth quarter of last year.
The BOK has raised its 2021 growth outlook for the Korean economy to 4% from its previous forecast of 3%. (Yonhap)