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(LEAD) Consumer prices grow at slower pace in Aug. amid falling oil prices

All News 08:55 September 02, 2022

(ATTN: UPDATES with more details throughout; ADDS photo)
By Kim Soo-yeon

SEOUL, Sept. 2 (Yonhap) -- South Korea's consumer prices grew at a slower pace in August after running at a 24-year high the previous month as global oil prices slid, data showed Friday, in a sign that high inflation may have peaked.

Consumer prices, a key gauge of inflation, jumped 5.7 percent last month from a year earlier, slowing from a 6.3 percent surge in July, according to the data from Statistics Korea. Compared with a month earlier, consumer inflation fell 0.1 percent.

The on-year growth of consumer prices slowed for the first time in seven months. The inflation rate stayed in the 6 percent range for the second straight month in July.

Consumer prices rose above 2 percent -- the central bank's inflation target over the medium term -- for the 17th straight month in August.

Citizens shop for vegetables at a discount store in Seoul on Aug. 28, 2022. (Yonhap)

Citizens shop for vegetables at a discount store in Seoul on Aug. 28, 2022. (Yonhap)

The statistics agency said prices of industrial goods, personal services and farm products extended their gains in August.

"But as prices of petroleum products sharply slowed, the inflation rate decelerated (from July)," Eo Woon-sun, a senior Statistics Korea official, told reporters.

Global oil prices fell amid concerns that aggressive monetary tightening in major economies could slow the global economy and weaken demand for fuel.

Prices of Dubai crude, South Korea's benchmark, stood at US$96.63 per barrel on average in August, down 6.3 percent from the previous month. The oil prices were still up 39 percent from a year ago.

Despite a letup in the August inflation, South Korea still faces high inflationary pressure as crude oil and other commodity prices rose due to the protracted war between Russia and Ukraine, and global supply disruptions. A recovery in demand from the pandemic also exerted upward pressure on prices.

Last month, prices of petroleum products jumped 19.7 percent on-year, slowing from a 35.1 percent advance in July. The August reading marked the slowest gain in six months. South Korea depends mainly on imports for its energy needs.

Prices of agricultural, livestock and fisheries goods went up 7 percent on-year. Amid frequent rains, vegetable prices climbed 27.9 percent, picking up from a 25.9 percent spike in July.

Prices of personal services increased 6.1 percent, the steepest on-year gain in over 24 years, driven by a recovery in demand and the lifting of major virus curbs. The cost of dining out expanded 8.8 percent.

Core inflation, which excludes volatile food and oil prices, rose 4 percent on-year last month.

Prices of daily necessities -- 141 items closely related to people's daily lives, such as food, clothing and housing -- jumped 6.8 percent in August, slowing from a 7.9 percent increase in July.

The Bank of Korea (BOK) is widely expected to further raise its policy rate in the coming months to tame inflation.

Last month, the BOK raised the key interest rate by 0.25 percentage point to 2.5 percent. The decision followed its first-ever "big-step" rate hike of 50 basis points in July and marked the seventh rate increase since August last year.

South Korea has faced the risk of stagflation, a mix of slowing growth and high inflation, due to heightened external economic uncertainty.

Inflation erodes people's purchasing power and could weigh on private spending. A rate hike is intended to curb inflation, but it could increase debt-servicing burdens and slow down economic growth.

In its latest revised outlook, the BOK lowered its 2022 economic growth forecast to 2.6 percent from 2.7 percent. The central bank sharply raised this year's inflation estimate to a 24-year high of 5.2 percent from 4.5 percent.

Finance Minister Choo Kyung-ho earlier said Inflation is likely to peak no later than in October if there is no sharp hike in global oil and grain prices.

The government is ramping up efforts to stabilize inflation in the runup to the extended Chuseok fall harvest holiday that runs from Sept. 9-12.

This photo, taken Aug. 28, 2022, shows gas and diesel prices at a filling station in Seoul. (Yonhap)

This photo, taken Aug. 28, 2022, shows gas and diesel prices at a filling station in Seoul. (Yonhap)


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