Inflation winds its way into services sector

A beauty shop in Seoul on August 8 last year. [YONHAP]

Inflation has spread into the services sector, pushing up the cost of haircuts and having clothes laundered.

Services are not as directly affected by the rise in raw materials such as crude oil as manufacturers. But as general inflation rises, so too do their costs.

The average price of getting a haircut for women in Seoul was 20,231 won ($16) last month, up 12 percent on year, according to the Korea Consumer Agency on Monday. It was the first time the average cost of a haircut exceeded 20,000 won.

The average admission to a public bathhouse rose 10.2 percent on year to 7,538 won. The cost of dry cleaning a suit increased 6.3 percent to 7,308 won.

Fees for chauffeur services were up 13.2 percent on year in May, according to data from Statistics Korea, while the cost of nursing services rose 7.4 percent.

The cost of moving homes rose 7.2 percent and housekeeping services 5.9 percent.

Inflation started to spread into services this year following a jump in overall consumer prices.

Consumer prices in May grew 5.4 percent from the same period a year earlier, the most rapid growth since a 5.6 percent increase in August 2008.

In both March and April, consumer prices rose over 4 percent on year.

Finance Minister Choo Kyung-ho has predicted inflation will remain above 5 percent due to internal and external factors, including the Russia-Ukraine war.

Processed food prices are usually affected by the rise in the price of raw materials, while service fees are usually affected by rises in labor costs.

“The last to be affected by inflation caused by raw material price increases is service fees, including haircuts and laundry,” said Kang Sung-jin, a professor in the Department of Economics at Korea University. “If inflation has reached this level [spreading to the services sector], it means wage inflation has come into full swing. The government should quickly respond in order not to cause an additional rise in inflation.”

BY JEONG JIN-HO, JIN MIN-JI [jin.minji@joongang.co.kr]