"This Year's Consumer Price Inflation Rate Surpasses Last Year's... Inflation Spread Higher Than 2008"

Restaurant Food Price Increase Hits Highest Level Since 1998

[Asia Economy Reporter Seo So-jeong] This year, the consumer price index and core inflation rate are expected to significantly exceed last year's levels. This is because inflationary pressures are spreading across a wider range of items due to ongoing global supply bottlenecks.

According to the "Assessment of Inflationary Pressure Diffusion Trends" released by the Bank of Korea on the 13th, South Korea's consumer prices have maintained a high increase rate in the 3% range since October last year, while the inflation diffusion index, which indicates the proportion of items with rising prices, has continued to rise.

In particular, the recent spread of inflation is higher than during past periods of rapid price increases in 2008 and 2011. Inflationary pressures are no longer limited to certain items such as petroleum products but are spreading to core items (excluding food and energy).

Within core items, the spread of price increases in dining-out items has been notably evident. As of December last year, prices of 38 out of 39 dining-out items, excluding coffee, rose compared to a year earlier, with 32 of these items increasing by more than 3%.

In January this year, coffee prices also rose, increasing the number of items with price hikes over 3% to 34, up from the previous month.

Accordingly, the rise in dining-out prices accelerated in the latter half of last year, significantly exceeding typical levels, and continued to expand in January this year, with the month-on-month increase rate (1.0%) reaching the highest level since 1998.

A Bank of Korea official stated, "Going forward, dining-out prices are expected to continue rising throughout this year due to persistent upward pressure from demand recovery and increased raw material costs, as well as strong downward price rigidity."

Additionally, inflationary pressures caused by global supply bottlenecks have gradually become more apparent, particularly in some durable goods such as automobiles and furniture.

Prices of automobiles and furniture rose intensively in the second half of last year, especially in the fourth quarter, and the inflation diffusion for these items was significantly higher compared to other durable goods.

Durable goods prices are expected to face stronger upward pressure this year than last year due to rising raw material prices, exchange rate increases, and delays in resolving global supply disruptions caused by the spread of COVID-19 variants.

The Bank of Korea stated, "The recent spread of inflation somewhat exceeds the levels seen during past rapid inflation periods. As inflation spreads more widely and price increases surpass target levels, if inflation expectations rise, this could act as an additional inflationary pressure. Therefore, it is necessary to stably manage the inflation expectations of economic agents."

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