Consumer prices rise 5% year-on-year in November

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Consumer prices rise 5% year-on-year in November

A customer shops at a large mart in downtown Seoul on Thursday. [YONHAP]

A customer shops at a large mart in downtown Seoul on Thursday. [YONHAP]

 
Consumer prices in November rose 5 percent year-on-year.  
 
According to Statistics Korea on Friday, last month’s consumer prices saw the slowest increase since April.  
 
However, they have increased more than 5 percent for the seventh consecutive month.  
 
The statistics agency noted that the easing of inflation is becoming evident as it cited the base effect of a lower year-on-year growth a year ago compared to the 5 percent increase last month.  
 
“It is true that a 5 percent consumer price increase is still high,” said Eo Woon-sun, an official from Statistics Korea. “However, I think it is meaningful that when compared to the previous month, [an increase in consumer prices] has dropped.”  
 
The statistics agency official noted that while there are still factors that could contribute to increasing consumer prices for this month, including processed food prices as well as international crude prices, those factors will likely be limited due to the falling demands due to the weakening global economy.
 
“We expect consumer prices to stabilize significantly starting next year compared to this year, unless a surprise factor emerges,” Eo said.  
 
Processed food and the cost of dining out continued to contribute to raising the overall consumer price whereas agriculture, livestock and fishery prices kept the overall prices from rising sharply.
 
The price of manufactured goods rose 5.9 percent while the price of agriculture, livestock and fishery products was 0.3 percent higher.  
 
Among manufactured goods, processed food prices rose 9.4 percent.  
 
“Considering the recently raised milk prices, processed food prices are likely to continue to rise for the time being,” Eo said.  
 
Petroleum prices including gasoline and diesel rose 5.6 percent. While gasoline prices declined 6.8 percent, diesel prices surged nearly 20 percent.  
 
Agriculture prices were down 2 percent compared to a year ago. In particular, vegetable prices dropped 2.7 percent.  
 
Pork prices were up 2.6 percent; chicken up 10.2 percent, onion prices surged 27.5 percent, radishes up 36.5 percent and potatoes up 28.6 percent.  
 
However, rice prices continued to drop, falling 10 percent year-on-year. Cucumber prices plummeted 33 percent, pumpkins fell 34.9 percent and Korean beef was down 2.4 percent.  
 
The prices of services including restaurants rose 6.2 percent. The price of eating and drinking at restaurant and bars rose 8.6 percent.  
 
The sharp increase in utility bills including electricity and gas, which increased 23 percent year-on-year, was another key factor that kept the year-on-year consumer price increase at 5 percent.  
 
While the Bank of Korea (BOK) projected the 5-percent consumer price increase to continue until early next year, the market is already expecting changes to the central bank’s monetary policy.  
 
The BOK since August last year has been aggressively raising the base borrowing rate. The base borrowing rate, which was at a historic low until July last year at 0.5 percent, was hiked up to 3.25 percent last month.  
 
That’s the highest interest rate since June 2011.  
 
The BOK raised the interest rate 0.5 percentage points in July this year, which was the first in a single hike as consumer prices surged at the sharpest level in 24 years. It then made its second 0.5 percentage point increase in October.  
 
However, those major steps were moderated last month, which was the final monetary policy committee meeting for this year, over concerns on weakening economic growth.  
 
“The market is expecting the U.S. Fed and the BOK to lower the interest rates, beyond moderating the speed of raising interest rates,” said Lim Jae-kyun, KB Securities analyst. “While the slowing of inflation has been confirmed [in both the U.S. and Korea], there are growing concerns over the economy.”  
 
Chair of the U.S. Fed Jerome Powell on Wednesday during a speech at the Brooking Institution said the Fed will likely adopt a smaller step on its interest rates hike ahead of its last meeting for this year.  
 
“It makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Powell said. “The time for moderating the pace of rate increases may come as soon as the December meeting.”
 

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