May Consumer Prices Down 0.3%... Negative for the First Time in 8 Months (Comprehensive)

Statistics Korea, May Consumer Price Trends

Impact of COVID-19 Combined with Oil Price Drop and Decrease in High School Tuition Fees

"Full Effect of Disaster Relief Funds Expected from June"

Sharp Rise in Dental Mask Prices... Statistics Korea "Considering Price Survey"

[Sejong=Asia Economy Reporters Kwangho Lee and Sangdon Joo] Last month, the consumer price inflation rate turned negative for the first time in eight months. The spread of the novel coronavirus (COVID-19) and the resulting 'social distancing' measures reduced dining-out demand, while the prior plunge in international oil prices pulled down overall prices.

According to the 'May Consumer Price Trends' released by Statistics Korea on the 2nd, the consumer price index last month was 104.71 (2015=100), down 0.3% compared to the same period last year. Compared to the previous month, it fell by 0.2%. This is the first time consumer prices have recorded a negative rate since September last year (-0.4%).

Hyungjun Ahn, Director of Economic Trend Statistics at Statistics Korea, explained, "The biggest reason for the decline in consumer prices last month was the sharp drop in petroleum product prices due to falling international oil prices, and the decrease in public service prices influenced by policy support in the education sector."

Among a total of 460 items, the living cost index, which reflects the prices of 141 items with high purchase frequency and expenditure share and represents perceived inflation, fell by 0.7% compared to a year ago. This is the lowest figure in eight months since last September (-0.9%).

The fresh food index, which reflects prices of 50 items subject to significant price fluctuations due to weather conditions or seasons, rose by 3.4% compared to a year ago. This is largely due to an increased share of livestock products and the rise in 'home consumption' of livestock products amid COVID-19.

The core inflation index, which excludes agricultural products and petroleum products to identify long-term trends by removing seasonal factors or temporary shocks, rose by 0.5% compared to the same period last year. It has remained in the 0% range for ten consecutive months since last July (1.0%).

The OECD-standard core inflation index, which excludes food and energy, increased by 0.1% compared to a year ago.

The impact of emergency disaster relief fund payments on prices is expected to be fully reflected from June. Director Ahn said, "We conduct three surveys on livestock product prices, and prices have continued to rise each time. Until now, this was thought to be due to increased home consumption caused by social distancing, but in May, there may have been some influence from disaster relief funds as well. Although some local governments such as Gyeonggi-do distributed disaster relief funds in April, nationwide distribution occurred in May, so this effect will be reflected in June."

He drew a line regarding concerns about deflation (price decline amid economic recession). Director Ahn said, "The dictionary definition of deflation is when the economy worsens, demand decreases, prices fall, and this continues for a certain period. However, this time, the price decline factors such as falling petroleum prices are supply-side rather than demand-side, and since it only lasted for one month in May, it is inappropriate to judge this as deflation."

Statistics Korea is also considering investigating the sharp rise in dental mask prices following the recent reopening of elementary schools. Director Ahn said, "Statistics Korea has not yet conducted a price survey on dental masks," adding, "We are discussing a dental mask price survey with the Ministry of Food and Drug Safety, which is the dedicated agency for masks."

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