(3rd LD) S. Korea's consumer prices up 5.7 pct on-year in Oct. on higher utility bills

All News 10:11 November 02, 2022

(ATTN: ADDS BOK's forecast, more info in paras 16-20)
By Kang Yoon-seung

SEOUL, Nov. 2 (Yonhap) -- South Korea's on-year growth in consumer prices accelerated from the previous month in October, data showed Wednesday, staying above the 5 percent level for six consecutive months amid higher utility bills and lingering global economic uncertainties.

Consumer prices, a key gauge of inflation, rose 5.7 percent last month from a year earlier, picking up speed from a 5.6 percent rise in September, according to the data from Statistics Korea.

In July, consumer prices increased at the fastest pace in almost 24 years at 6.3 percent.

Consumer prices stayed above 2 percent -- the central bank's inflation target over the medium term -- for the 19th straight month in October.

"While prices for agricultural, fisheries and livestock products slowed, the overall growth expanded due to electricity, water and gas," said Eo Woon-sun, a senior Statistics Korea official.

"As we do not expect (on-year growth) to rise beyond 6 percent, it is possible that (July) was the peak," he added.

Eo Woon-sun, a senior Statistics Korea official, speaks during a press conference in the central city of Sejong on Nov. 2, 2022. (Yonhap)

The price of utility services gained 23.1 percent on-year in October amid high energy costs around the globe, marking the highest level since the agency started compiling related data in January 2010. South Korea relies heavily on imports for its energy needs. In September, the sector grew 14.6 percent on-year.

The state-run Korea Electric Power Corp. earlier decided to raise the adjusted unit fuel cost, a key part of the country's electricity rates, for the October-December period amid high energy costs.

The agency added the price of petroleum products increased 10.7 percent on-year in October, slowing from 16.6 percent posted in September.

The price of agricultural, fisheries and livestock products advanced 5.2 percent on-year in October, narrowing the growth from 6.2 percent tallied a month earlier. Vegetable prices especially shot up 21.6 percent over the period.

Those of processed foodstuffs increased 9.5 percent.

Prices of personal services increased 6.4 percent on-year in October, with those of dining out soaring 8.9 percent.

Core inflation, which excludes volatile food and oil prices, rose 4.2 percent on-year last month, slightly up from 4.1 percent in September.

Prices of daily necessities -- 144 items closely related to people's daily lives, such as food, clothing and housing -- jumped 6.5 percent on-year in October.

"There are concerns that the global oil prices may become unstable again following OPEC Plus' decision to cut production, and we also need to consider the rebounding costs of grains due to Russia's weaponization of food," Eo said.

The Bank of Korea (BOK) held a meeting to analyze the latest price data and forecast that inflation could grow at the 5 percent range until the first quarter of next year.

The central bank voiced worries over mounting uncertainty over the inflation path, saying that upward and downward risks are coexisting, such as slowing economic growth, the weakening local currency and price hikes due to a cut in production.

Without clear signs of inflation easing, the BOK appears to be under more pressure to continue its push for interest rate increases.

Last month, the BOK raised its key policy rate by 0.5 percentage point to 3 percent to bring inflation down. It marked the second-ever big-step increase and the eighth rise in borrowing costs since August last year amid the inflation pressure.

The central bank is widely expected to deliver another rate hike in its last rate-setting meeting this year scheduled for later this month.

In a separate statement, the finance ministry said prices are expected to remain high "for a considerable period," although the growth is expected to flatten gradually.

The ministry also said the rising demand for vegetables amid the annual kimchi-making period ahead of winter and the strong U.S. dollar are expected to keep overall prices high.

The Korean won has dipped up to around 17 percent against the greenback this year amid global economic uncertainties, driving up the costs of imports.