Consumer prices jump 3.4% as climate, oil prices take toll

A customer buys groceries at a supermarket in Seoul on May 23. [NEWS1]

Korea’s consumer prices bounced above 3 percent in August after two months of staying below the range.

Consumer prices, a key index to measure inflation, grew 3.4 percent in August from a year earlier, gaining pace from 2.3 percent growth in July and 2.7 percent growth in June, showed data from Statistics Korea on Tuesday.

Inflation grew at the fastest pace since 3.7 percent in April.

Inflation has been generally falling after it peaked at 6.3 percent in July last year.

“Prices of livestock and fisheries fell, but those for agricultural products soared 10.5 percent due to the heat wave and heavy rainfall, resulting in a 5.3 percent growth for the industry from a year earlier,” according to the Ministry of Economy and Finance in a statement.

Prices of petroleum products fell 11 percent on year but rose 8.1 percent from a month earlier, reflecting a rise in global oil prices since mid-July.

Dubai crude oil price rose to $86.6 per barrel in August compared to $74.7 in June.

The service sector, which includes outdoor dining, grew 4.3 percent on year, the slowest growth in 18 months. Prices for electricity, gas and water fees jumped 21.1 percent on year, remaining unchanged from the previous month.

Core inflation, which excludes volatile food and energy prices, rose 3.3 percent on year, staying unchanged from the previous month. Inflation, excluding agricultural and petroleum products, rose 3.9 percent, also remaining steady from the previous month.

“The fact that the two indexes that reflect core inflation remained the same shows that the August inflation was a change caused by temporary factors, not the change in its direction,” said Kim Bo-kyung, a senior official at Statistics Korea in a press conference on Tuesday.

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“The general slowing of inflation is being maintained,” said the ministry in a statement. “Inflation is expected to stabilize after October once temporary factors are eased.”

The faster gain of consumer prices in August “was largely attributed to base effect,” said the Bank of Korea. Inflation “did not diverge largely from the economic forecast in August, but the growth rate has somewhat grown along with the rapid rise of the prices of petroleum and agricultural products.”

Consumer prices are projected to stay at a similar level as in August or grow slightly higher in September, but it will fall to around 3 percent in the fourth quarter once the uncertainties from seasonal factors have been eased, the central bank said.

Bank of Korea Gov. Rhee Chang-yong in August projected inflation to fall below the mid-2 percent range starting in the second half of next year.

“It’s difficult to slow inflation in a short period of time because there are a lot of factors derived from abroad,” Rhee said in a plenary session last month. He stressed Korea is one of the few advanced nations that has seen inflation fall below 3 percent.

Finance Minister Choo Kyung-ho said on Monday that consumer prices are projected to surpass 3 percent through September, but will start to stabilize starting in October.

The figure “could recover to a 2 percent range in November or December or even October if early,” Choo told reporters in a press conference. He added inflation could fluctuate in September due to a surge in demand for agricultural products ahead of the Chuseok harvest holidays, which starts on Sept 28.

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