Korean inflation ticks up in January led by higher utility rates

Economy

Published: 02 Feb. 2023, 10:12 Updated: 03 Feb. 2023, 10:03

Korean inflation ticks up in January led by higher utility rates

Customers shop at a grocery store in Seoul on Monday. [YONHAP]

Inflation is remaining stubbornly high, the number rising on month in January as utility rates increased.

Consumer prices rose 5.2 percent on year in January, beating the 5.0 percent rise in December, according to Statistics Korea on Thursday.

It's the first time in three months in which inflation rose, since October's 5.7 percent topped September's 5.6 percent.

The Bank of Korea notes that the rate is within "expected" limits compared to when inflation was 5.4 percent in May, 6.0 percent in June and 6.3 percent in July.

Utility services led the rise, with the prices of electricity, gas and water up 28.3 percent, the biggest rise since the data were first compiled in 2010. Electricity rates were increased in January, following the rises in April, July and October last year.

The increase in utility prices contributed 0.94 percentage points to inflation in January, compared with a 0.49 percentage points contribution in July and a 0.77 percentage points contribution in October.

Industrial product prices rose 6 percent on year, with oil prices rising 5 percent, down from a 6.8 percent increase in the previous month.

Processed foods inflation was 10.3 percent, unchanged from the previous month.

Agricultural, fisheries and livestock product prices increased 1.1 percent, agriculture prices down 0.2 percent, fishery product prices up 0.6 percent and livestock prices up 7.8 percent.

Personal service inflation was 5.9 percent, down from December's 6 percent. The price of dining out rose 7.7 percent on year in January.

Core inflation, which excludes volatile food and energy prices, was 4.1 percent.

The prices of daily necessities were up 6.1 percent on year.

The graph shows inflation in Korea from July 2022 to January 2023. [STATISTICS KOREA]

"Rising electricity bills contributed greatly to the increase in January's consumer prices, as the contribution from utility service prices climbed 0.17 percentage points from the previous month," a spokesperson for Statistics Korea said on Thursday.

Public utility service prices are set to continue increasing in the short term, in line with the Korean government's view that Korea will continue to face more hurdles in the first half.

The Ministry of Trade, Industry and Energy will raise electricity rates by 13.1 won per kilowatt-hour on Dec. 30, 2022. The total rise in 2022 was 19.3 won.

Bus fares are to increase by 300 won ($0.25) and train fares by 400 won in April. Other provincial and city governments are considering increases as well.

Taxi fares in Seoul are already up, with the flag fall increasing to 4,800 won from 3,800 on Wednesday.

Inflation is unlikely to break in February as well, according to the Bank of Korea.

"Uncertainties, such as the impact of China's reopening on the prices of raw materials and the global economy lie ahead," the central bank announced in a report released on Thursday.

The upward pressure on international raw material prices will grow stronger if the global economy recovers at a faster-than-expected speed, based on China's economic reopening after the lift of its Covid-19 lockdowns, it added.

BY SOHN DONG-JOO [sohn.dongjoo@joongang.co.kr]