Consumer prices rise above 4%

Economy

Published: 05 Apr. 2022, 13:55 Updated: 05 Apr. 2022, 20:03

Consumer prices rise above 4%

Consumer prices grew at the fastest pace in 10 years due to rising energy prices. As a result manufactured food product prices were up 6.4 percent. [YONHAP]

Consumer prices grew 4.1 percent in March, the fastest rate in a decade, fueled by Russia's war on Ukraine.

With the conflict showing no sign of resolution, prices are expected to rise further.

In response, the government is cutting a fuel tax by 30 percent starting in May. It is promising support to people who drive commercial vehicles running on diesel, including trucks, buses and taxis.

According to Statistics Korea on Tuesday, March's 4.1 percent increase in consumer prices was the briskest rise since December 2011's 4.2 percent.

A surge in energy prices and weakness of the Korean currency added to the sharp rise.

But even the core inflation rate -- which excludes volatile energy and food prices -- saw the sharpest increase since December 2011.

In March, the core inflation rate was 3.2 percent, the second month in a row it exceeded 3 percent.

Inflation started picking up last April, when consumer prices grew 2.5 percent.

“Consumer prices in March grew in every area from manufactured goods, services, utilities as well as in agriculture, livestock and fisheries,” said Eo Woon-sun, a Statistics Korea spokesperson. “It’s hard to say if this 4-percent range will remain [in coming months] ... as raw material prices, grain prices and global supply chain bottlenecks could get worse due to the Russia-Ukraine war.”

Petroleum goods saw the sharpest increase among all goods and services last month, 31.2 percent year-on-year.

Driven by rising international crude prices, gasoline priceS rose 27.4 percent from a year ago, diesel was up 38 percent and kerosene prices surged 47.1 percent.

The prices of liquefied natural gas for vehicles was up 20 percent.

Dubai crude, which is Korea's main imported oil, was selling for $110.9 per barrel in March, an 85 percent surge from a year earlier.

With higher fuel prices, manufactured good prices also rose.

Manufactured goods rose 6.9 percent compared to a year earlier, while manufactured food prices went up 6.4 percent.

Imported beef prices were up 27.7 percent. Prices for hanwoo, or Korean beef, rose 3.6 percent. Pork prices were up 9.4 percent.

Vegetable prices, however, dipped 0.2 percent.

Green onion prices tumbled 62 percent while onion prices fell 50 percent. Apple prices were down 21 percent and rice fell 7.5 percent.

To help consumers, a fuel tax cut of 20 percent will be increased to 30 percent from May to the end of July.

Taxes on gasoline will be lowered 83 won per liter, 58 won for diesel and 21 won for LPG.

With the additional tax cut, the tax on gasoline is 573 won per liter, 407 won for diesel and 142 won for LPG.

Assuming a person drives a vehicle with a fuel efficiency of 10 kilometers per liter and travels 40 kilometers a day, he or she will save 30,000 won a month, the government claimed.

That’s three times the 10,000 won the same driver would have saved from the 20 percent cut.

The government will lose roughly 2 trillion won in fuel tax.

To support operators of commercial vehicles impacted by higher fuel costs. the government will subsidize 50 percent of diesel prices that exceed 1,850 won per liter.

As an example, if a vehicle operator pays 1,920 won per liter for diesel, the government will pay 35 won. Operators of vehicles will be given special credit cards to avail of the discounts.

The government estimates that some 445,000 trucks, 21,000 buses, 93,000 taxis and 13,000 coastal cargo ships.

“Consumer prices are more important than anything else,” said Finance Minister Hong Nam-ki during a government meeting on consumer prices on Tuesday.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]