Bank of Korea warns of continued inflation pressures

Home > Business > Economy

print dictionary print

Bank of Korea warns of continued inflation pressures

Containers stacked at a pier in Busan Port on May 31. [YONHAP]

Containers stacked at a pier in Busan Port on May 31. [YONHAP]

 
Uncertainties globally could continue to put upward pressure on prices in Korea, according to the Bank of Korea's research bureau.
 
It cited the war in Ukraine and China's zero-Covid policy in the statement released Monday.
 
The analysis comes as central banks globally increase rates to slow price growth, but also as signs emerge that major economies may be tipping into recession.
 
Inventories are building up fast, at U.S. retailers and for electronic manufacturers, while the Atlanta Fed's GDPnow estimate service anticipates a fall in second-quarter GDP, which would mean a recession.
 
The Korea central bank's research bureau said the Russia-Ukraine war led to higher prices for energy and food, while lockdowns in China disrupted manufacturing.  
 
"A notable characteristic of the recent global supply chain disruption is a marked increase in cost pressure and concentrated supply chain disruptions in certain sectors, like cars," the research bureau wrote in the statement.  
 
Costs have generally increased across industries due to a rapid rise of energy and raw material prices caused by the geopolitical instability, the research bureau continued.
 
Russia is one of the world's top three crude producers along with Saudi Arabia and the United States.  
 
The research bureau notes that China has reopened in certain areas and that production has been restarted by many companies. It said the production of automobiles was particularly hard hit because of long supply chains and the use of components that are not easy to substitute.  
 
The number of Hyundai Motor cars sold in the United States in the first half of this year was down 13.3 percent on year, while Kia's U.S. sales fell 11.9 percent in that period. They cited a lack of semiconductors as a primary reason for the sales slowdowns.  
 
Construction companies and equipment manufacturers have also been hard hit by the lack of components and materials.  
 
Some Korea companies stocked up on inventory of some items, so were cushioned from the disruptions, the report said.
 
The seasonally-adjusted Korea Manufacturing Purchasing Managers' Index (PMI) fell from 51.8 in May to 51.3 in June, indicating of expansion for a 21st month in a row, according S&P Global on Friday.    
 
"Nonetheless, the rate of growth was only modest and the slowest recorded since March," it added.  
 
A reading above 50 indicates that manufacturing is generally expanding.  
 
"June data provided evidence that price and supply pressures were actively hindering production and demand in the South Korean manufacturing sector," wrote Usamah Bhatti, economist, S&P Global Market Intelligence. "The latest Manufacturing PMI was the softest for three months and pointed to a modest expansion in operating conditions — a far cry from the strong levels of growth seen at this time last year."
 
The Bank of Korea raised the base rate by 25 basis points to 1.75 percent in May. It was the second consecutive rate rise and the fifth in the current round of monetary tightening that began last August.    
 
In June, inflation hit 5.4 percent in Korea.
 
 

BY JIN MIN-JI [jin.minji@joongang.co.kr]
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)