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(2nd LD) Consumer prices growth hits over 4-yr high in Jan.

All News 10:19 February 02, 2017

(ATTN: UPDATES with comments, backgrounds in last 5 paras)

SEJONG, Feb. 2 (Yonhap) -- South Korea's consumer prices rose at the fastest clip in more than four years in January on a sharp rise in food prices, government data showed Thursday.

The country's consumer price index gained 2 percent last month from a year earlier, accelerating from the previous month's 1.3 percent rise, according to the data compiled by Statistics Korea.

The January figure marked the highest on-year gain since October 2012.

From a month earlier, the index also edged up 0.9 percent in January.

Core inflation, which excludes volatile oil and food prices, increased 1.7 percent compared with last year.

(2nd LD) Consumer prices growth hits over 4-yr high in Jan. - 1

The statistics office said high prices of vegetable and poultry products pushed up the inflation in Asia's fourth-largest economy last month by a large extent.

Prices of fresh fruit and vegetables jumped 12 percent in January from a year earlier due to a protracted supply shortage stemming from sizzling heat and a typhoon in the summer.

In particular, prices of Chinese cabbages and radishes surged 78.8 percent and 113 percent, respectively, and those of carrots soared 125.3 percent.

Also, the worst outbreak of avian influenza, which led to a culling of more than 13 million chickens and ducks in about two months, lent support to the steep rise in monthly consumer price index.

Livestock products saw their prices leap 9.5 percent on-year, with prices of eggs vaulting 61.9 percent and those of beef gaining 4.7 percent.

"Rising prices of farm products were the main culprit of the last month's sharp inflation," said Woo Young-jae, director of the price statistics division at the statistical bureau. "People may feel higher prices these days as price tags on foodstuffs and groceries have been rising, along with higher gas prices at the pump."

Prices of gasoline and petroleum products advanced 8.4 percent last month from a year ago amid an upturn in the global crude oil price.

On the other hand, public utilities rates, including electricity, fell 8.3 percent from a year ago on the government's plan to lower household electricity bills by an average 11 percent.

The central bank has set its long-term target inflation at 2 percent, while the country's consumer prices grew 1 percent from a year earlier in 2016.

(2nd LD) Consumer prices growth hits over 4-yr high in Jan. - 2

The government held a minister-level meeting chaired by Finance Minister Yoo Il-ho in Seoul to discuss ways to ease the upbeat trend of living costs.

It expected the country's consumer prices to come under pressure to rise due to rising crude oil prices and the weakening local currency against the U.S. dollar.

"Consumer prices will likely hover around the 1.5-2.0 percent range in the coming months," the Ministry of Strategy and Finance said in a release. "The government will look into the supply and demand of farm products to relieve the prices."

But prices of groceries and other foodstuffs will cool down in the future as more imported eggs will hit local shelves in February and the supply of key vegetables will increase before spring comes, added the ministry.

Experts noted that it is necessary to come up with measures to increase the supply of daily necessities to prevent a possible contraction in private consumption.

"The recent sharp rise in inflation doesn't seem to mean stagflation. It is just about a rise in living costs, which put a hole in people's wallet," said Sung Tae-yoon, a professor at Yonsei University. "Higher food prices and utility bills will weigh heavily on household consumption. The government should expand the supply and control public bills, instead of using monetary policies.


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