Import Prices Surge to Highest in 13 Years... Inflation Faces Another 'Emergency' (Comprehensive)

BOK Reports 35.8% YoY Surge in October Import Price Index
MoEF: "Possibility of Domestic Demand Improvement"

On the 12th, when the government's temporary 20% fuel tax reduction for six months began, fuel price information was displayed at a directly operated gas station in downtown Seoul. Photo by Moon Honam munonam@

[Asia Economy Reporters Jang Sehee and Son Sunhee] Due to the rise in crude oil and raw material prices, the import price inflation rate last month recorded the highest level in 13 years. The government expects domestic demand conditions to improve with the With-Corona policy. As supply chain instability coincides with increased demand, domestic consumer prices are expected to rise again.

According to the "October Export-Import Price Index" released by the Bank of Korea on the 12th, the import price index (provisional figure in Korean won, base year 2015 = 100) last month was 130.43, up 4.8% from September. The absolute level of the index is the highest in 8 years and 8 months since February 2013 (130.83). Compared to the same month last year, it rose 35.8%, the largest increase in 13 years since October 2008 (47.1%).

Choi Jinman, head of the Price Statistics Team at the Bank of Korea's Economic Statistics Bureau, stated, "The rise in international oil prices and raw material prices influenced the increase in import prices," adding, "The price of Dubai crude oil in October rose 12.4% compared to the previous month, and the Commodity Research Bureau (CRB) raw material price index also increased by 6.5%."

Last month, international oil prices rose 12.4% in one month based on Dubai crude oil. Compared to the same month last year, it surged by 100.7%. Accordingly, increases were also notable in mining products (11.1%), intermediate goods such as coal and petroleum products (10.8%), and primary metal products (5.5%).

The rise in import prices also pushed up export prices. The export price index was recorded at 116.18, 1.6% higher than in September. It has been on an upward trend for 11 consecutive months since November last year. Compared to the previous month, coal and petroleum products (12.3%) and chemical products (2.2%) rose, while computers, electronics, and optical equipment fell by 2.2%.

Along with the rise in import prices, the possibility of domestic demand recovery gained weight. The Ministry of Economy and Finance stated in the "Recent Economic Trends November Issue" that the recent Korean economic situation shows signs of improving domestic demand conditions. The term "uncertainty," which had been used for four consecutive months until last month, was omitted this month. The domestic card approval amount in October increased by 13.4% compared to a year ago, marking the ninth consecutive month of growth. The increase rate is the highest since April (14.3%).

As supply instability and domestic demand recovery overlap, consumer prices are expected to continue rising. In particular, import prices are expected to rise further due to strong oil prices. Team leader Choi Jinman said, "Even in November, international oil prices have continued a slight upward trend, and the strong natural gas prices are causing consumption to shift to petroleum products."

The Ministry of Economy and Finance also diagnosed that external uncertainties persist due to global inflation, major countries' monetary policy shifts, and expanded supply chain disruptions. Kim Younghoon, head of the Economic Analysis Division at the Ministry of Economy and Finance, said, "Due to rising prices in major countries negatively affecting import prices, upward pressure on prices has been high since the second half of the year." However, he added, "Agricultural product prices are gradually stabilizing, and although international oil prices are high, the 20% reduction in fuel tax will act as a downward factor."

Professor Kim Sangbong of Hansung University’s Department of Economics said, "From March next year, as the base effect disappears, the inflationary trend may expand further," adding, "If prices continue to rise while the growth rate records the high 1% range, concerns about stagflation (economic slowdown accompanied by inflation) may arise."

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