August Consumer Prices Up 2.6%... Food, Rent, and Transportation Costs Rise Sequentially (Comprehensive)

Impact of International Oil and Grain Prices... Processed Food Prices Also Rising One After Another
Prices of Agricultural, Livestock, and Marine Products Rise 3.9%, Driving Upward Trend

[Sejong=Asia Economy reporters Kim Hyunjung and Son Sunhee] Last month, consumer prices rose 2.6% compared to the same period last year, marking a 2% range increase for five consecutive months.

According to the 'August Consumer Price Trends' released by Statistics Korea on the 2nd, the consumer price index last month was 108.29 (2015=100), up 2.6% year-on-year. The consumer price inflation rate first exceeded the government's 'management target' of 2% this year in April at 2.3%, and then recorded 2.6% in May, 2.4% in June, and 2.6% in July. It is the first time in over four years since 2017 (January to May) that prices have recorded a 2% range increase for five consecutive months.

Prices of industrial products, services, agricultural and marine products, and electricity, water, and gas all rose, driving the upward trend. Eo Unseon, the Economic Trend Statistics Officer at Statistics Korea, explained, "The 2.6% increase was due to continued rises in petroleum products, personal services, and agricultural and livestock product prices."

Living expenses surged 3.4% compared to last year, and fresh food jumped 4.1%. Among food items, fresh fruits soared 27.3%, and fresh fishery products rose 1.2%. Fresh vegetables fell 11.6%.

By item, goods rose 3.9%, agricultural and marine products 7.8%, and industrial products 3.2% year-on-year. The industrial product price increase rate is the largest since May 2012 (3.5%). Regarding this, Officer Eo added, "The biggest impact came from the rise in petroleum product prices due to the increase in international oil prices," and "cost burdens increased due to rising international raw material and grain prices, leading to higher factory prices for processed foods, etc."

Services rose 1.7%, with rent up 1.6% and personal services up 2.7%. Public services, on the other hand, fell 0.7%.

Looking at major fluctuating items, pork rose 11.0%, eggs 54.6%, domestic beef 7.5%, watermelon 38.1%, and spinach 35.5% compared to last year. Major industrial product price increases were gasoline 20.8%, diesel 23.5%, and automotive LPG 25.3%. Overall rent rose 1.6%, with jeonse (long-term deposit rent) and monthly rent increasing 2.2% and 0.9%, respectively. Rent is at its highest level since August 2017 (1.6%), jeonse since January 2018 (2.2%), and monthly rent since July 2014 (0.9%).

The core inflation rate (index excluding agricultural products and petroleum products), which shows the underlying trend of prices, rose 1.8%, continuing to increase for six consecutive months following March (1.0%), April (1.4%), May (1.5%), June (1.5%), and July (1.8%). The August core inflation itself is the highest in four years since August 2017 (1.8%).

Officer Eo explained, "The consumer price inflation rate exceeded the mid-2% range again last month, showing a larger increase than expected," and "while demand-side inflationary pressures expanded as the economy recovered, supply-side inflation factors such as agricultural and marine products and international oil prices were larger than expected."

Statistics Korea expects a high possibility of further price increases in September. Officer Eo analyzed, "There are weather factors such as prolonged autumn monsoon, holiday factors, and continuously rising inflation expectations," adding, "there are many upward factors in that regard." He continued, "However, the base effect from the previous month is weakening, and although agricultural and marine products are rising more slowly than expected, I believe the upward trend will slow down," and "while upward factors seem greater, the increase will not be unexpectedly large due to government supply of essential goods."

He also forecasted that disaster relief funds to be distributed from this month will affect prices. He explained, "There are differences by industry," and "since face-to-face services are still at a level difficult to recover, the inflationary effect may vary depending on how the funds are mainly used."

Earlier, the Bank of Korea projected on the 26th of last month that consumer prices would rise 1.8% in the first half and 2.4% in the second half of this year, resulting in an annual increase of 2.1%. The background for the price increase was cited as the rise in agricultural and marine products, international oil prices, and demand-side inflationary pressures.

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