Food prices climb amid drought, but CPI still low

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Food prices climb amid drought, but CPI still low

The consumer inflation rate in July was below 1 percent for its eighth straight month, but prices of food - particularly vegetables - skyrocketed due to the protracted draught, government data showed Tuesday.

Statistics Korea said the consumer price index (CPI) for July rose 0.7 percent year-on-year, the same growth as June.

Since December 2014, when consumer inflation recorded 0.8 percent, the rate has been below 1 percent.

In March and April, the rate dipped to the lowest level since July 1999, 0.4 percent, raising concerns that the economy is slipping into deflation.

Falling global crude oil prices led to plunges in gasoline, diesel and liquefied petroleum gas prices. City gas bills dropped 20.1 percent year-on-year, and electricity bills were down 6.7 percent.

Likely due to the outbreak of Middle East respiratory syndrome, prices for group tour packages for domestic travel dropped 8.1 percent.

Despite longstanding deflation, prices for vegetables, meat and seafood rose 3.7 percent from a year earlier, mainly because of the unusual draught during the summer monsoon season.

Prices of Napa cabbage and daikon radish, both used to make the Korean staple kimchi, rose 24 percent and 63 percent year-on-year, respectively. Scallions, another key ingredient in Korean cuisine, jumped 73.5 percent. Garlic prices climbed 33.9 percent, and onion costs rose 57.3 percent.

Korean beef prices increased 4.7 percent, and pork prices climbed 2.9 percent.

Despite prolonged low inflation and worries about Korea’s slumping economy, the government expects inflation to rebound in the second half.

“Heading toward the second half this year, the consumer price index is expected to be pushed up by several factors,” an analysis by the Ministry of Strategy and Finance said Tuesday.

“The impact of falling global oil prices [which started the second half last year] will diminish, and the real economy [of Korea] is expected to recover.

“Still, several geographical reasons, such as whether the sanctions on Iran will be lifted or a natural disaster during the summer, could be other variables,” it added.

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