March Consumer Prices Rise Over 1% for Third Consecutive Month... Perceived Inflation Jumps (Comprehensive)

Statistics Korea Announces March Consumer Price Trends
Vegetables Up 16.5%, Livestock Products Up 6.7%, Increasing Grocery Basket Costs

[Sejong=Asia Economy reporters Kim Hyunjung and Joo Sangdon] Despite the spread of the novel coronavirus infection (COVID-19), consumer prices maintained a rise in the 1% range for three consecutive months last month. However, the increase was limited due to the government's reduction of the individual consumption tax on passenger cars and the decline in international oil prices, while prices of food items such as livestock products and processed foods, which saw increased household consumption, surged, indicating a sharp rise in grocery prices.

According to the 'March Consumer Price Trends' released by Statistics Korea on the 2nd, the consumer price index last month was 105.54 (2015=100), up 1.0% compared to the same month last year. The price index, which had only risen 0.4% last year, has recorded a 1% range increase for three consecutive months since January this year. However, the rise was somewhat moderated compared to January (1.5%) and February (1.1%) due to factors such as the decline in international oil prices and the reduction of the individual consumption tax on passenger cars.

The 'index excluding agricultural products and petroleum,' which excludes seasonal factors or temporary shocks to reflect the underlying price changes, rose 0.7% compared to the same month last year. According to the OECD standard, the 'index excluding food and energy,' which excludes food and energy-related items, increased by only 0.4% year-on-year. This is the lowest increase since December 1999 (0.1%), during the final stage of the International Monetary Fund (IMF) foreign exchange crisis.

On the other hand, the fresh food index rose 3.8% compared to the same month last year. Fresh fish and shellfish increased by 8.4%, fresh vegetables by 16.6%, while fresh fruits fell by 10.0%. Statistics Korea analyzed that fruit prices are declining due to a bumper fruit harvest last year.

Some expected prices to fall sharply due to the worsening economic situation caused by COVID-19, but Statistics Korea's analysis suggests that price increases due to changes in consumption patterns somewhat offset the downward trend. In particular, processed foods, which saw increased household demand, rose 1.7% year-on-year, and prices of pork (9.9%) and eggs (20.3%) also surged for the same reason. Additionally, due to good crop yields and the significant price drops last year, prices of vegetables such as napa cabbage (96.9%), onions (70.6%), and pumpkins (58.1%) surged by 16.5%. Although the overall price increase was limited to 1%, grocery prices, which directly affect ordinary people, rose significantly. Conversely, prices for entertainment and culture, including overseas group travel and fresh flowers, fell 1.3%, marking the largest decline since -3.6% in September 2006.

Furthermore, industrial products rose 1.3%, and electricity, water, and gas increased by 1.6%, resulting in an overall product price increase of 1.6% by item category. In services, despite rents and public services falling by 0.1% and 0.6% respectively, personal services rose 1.1%, leading to an overall increase of 0.5%.

Statistics Korea expects that future prices may see limited increases as the COVID-19 situation is reflected with a lag, but due to last year's base effects, negative growth rates are unlikely. Ahn Hyungjun, Director of Economic Trend Statistics at Statistics Korea, said, "Since prices were very low last year, it seems difficult to record negative growth. However, if the global economy worsens due to COVID-19, it is expected to affect individual countries as well. We need to observe further how demand decreases impact prices and supply chain issues." Regarding factors for price declines in April, he explained, "Considering the delayed reflection of free education policies, school meal costs, and tuition fees due to postponed school openings, as well as the international price impact on petroleum products that will be fully reflected in 3-4 weeks, there is a possibility of further declines."

Meanwhile, mask prices, which surged due to skyrocketing demand from COVID-19, have stabilized downward following the government's public mask policy. Masks priced in the 5,000 won range online and 2,000 won range offline (including pharmacies and marts) in February dropped to the 4,000 won and 1,800 won ranges respectively last month. Specifically, masks sold only at pharmacies were priced around 1,600 won, close to the public mask supply price (about 1,500 won).

This content was produced with the assistance of AI translation services.