The Peak of Prices Is Still Far Away... Heatwave Fuels 'Inflation'

June Consumer Price Index 110.42
7.4% Surge Compared to One Year Ago
Agricultural Product Prices Rise for the First Time in 5 Months
Double-Digit Increase in Livestock Prices

Ukraine Crisis and Supply Chain Disruptions Cited as Causes
No Suitable Countermeasures, Causing Problems
Vegetable Prices Soar Due to Rainy Season and Heatwave
High Inflation Expected to Continue in July and August

On the 4th, a day before the government's announcement of June consumer price trends, citizens are shopping at Namdaemun Market in Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Seo So-jeong, Sejong=Reporter Son Seon-hee] The 6.0% consumer price inflation rate in June is merely a prelude to the onslaught of ultra-high inflation. This is because external variables such as international oil prices and global supply chain instability, which are the main causes of the rapid price surge, remain unchanged, and agricultural and marine product prices are also fluctuating due to the early heatwave. At this point, it is difficult to predict how long and how much prices will rise. In fact, there are no “sharp measures” from the government to curb high inflation beyond monetary policy.

The problem is that the economic burden on ordinary people living in an era of high inflation for the first time in about 24 years is increasing. Last month, the living cost index was 110.42 (2020=100), up 7.4% compared to the same period last year. This exceeds the overall consumer price index increase of 6%. The living cost index is separately compiled for 144 items that are frequently purchased and have a high expenditure share, meaning that the pain felt on the ground is even greater.

Despite the government's maximum reduction in fuel tax, the price rise of petroleum products expanded from the previous month (34.8% to 39.6%) as discussions on the introduction of a price cap on Russian crude oil exports have recently progressed internationally. Compared to a year ago, diesel prices rose by 50.7%, and gasoline (31.4%) and automotive liquefied petroleum gas (LPG, 29.1%) also surged significantly.

Agricultural, livestock, and marine products also rose by 4.8%, mainly driven by livestock products and vegetables, increasing from the previous month’s 4.2%. Agricultural product prices, which had been relatively stable, turned to an increase (1.6%) for the first time in five months, and livestock products continued to show a double-digit rise (10.3%) following the previous month.

Customers are shopping at a large supermarket in Seoul on the 3rd, as vegetable prices surge due to the recent heavy rain and the monsoon season./Photo by Kang Jin-hyung aymsdream@

The ongoing heatwave is also a factor that fuels already high prices. Amid soaring livestock product prices due to increased feed costs caused by the Ukraine crisis, agricultural product prices are also soaring due to the effects of the rainy season and heatwave.

According to the Korea Agro-Fisheries & Food Trade Corporation (aT)’s Agricultural Product Distribution Information System (KAMIS), the average wholesale price of green lettuce nationwide was 77,160 KRW per 4kg as of the 4th, a sharp increase of 59.2% from the previous day’s 48,460 KRW. This is due to reduced production and shipment caused by the rainy season and heatwave. Cucumbers also showed a significant rise. The nationwide average wholesale price of multi-stem cucumbers was 109,333 KRW per 100 pieces, jumping 75% in one day.

A representative from the Korea Agro-Fisheries & Food Trade Corporation said, “In the case of leafy vegetables, prices have risen unusually sharply recently due to decreased product quality and shipment volume caused by the rainy season,” adding, “Following the rainy season, the heatwave immediately reduced supply, resulting in a significant price increase in agricultural products.”

If this trend continues, the overall consumer price inflation rate for July and August could soar to the 7-8% range. According to the Statistics Korea consumer price index, in 2018, which had the highest number of heatwave days so far, the agricultural, livestock, and marine product inflation rate (compared to the same month the previous year) jumped from 4.6% in August to 8.6% in September, a 4 percentage point increase. In 2016, which had the second-highest number of heatwave days, it rose from 0.5% in August to 9.1% in September, an 8.6 percentage point increase in just one month.

Joo Won, head of the Hyundai Research Institute, said, “In years with heatwaves, fresh food prices tend to rise, causing a jump in the inflation rate,” and predicted, “From this month, the increased electricity and gas rates will be reflected in prices, and since agricultural, livestock, and marine product prices are all showing an upward trend recently, high inflation may continue in July and August.”

The bigger problem is that external supply factors such as the Ukraine crisis, supply chain disruptions, and rising international grain prices are driving the upward trend, leaving no obvious breakthrough. The Ministry of Economy and Finance stated, “Difficult price conditions may continue for the time being,” and took a general stance, saying, “We will continue to seek additional measures to minimize the burden on people’s livelihoods.”

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