South Korea’s consumer prices grew less than 1 percent for the sixth month in a row in May, a government report showed Tuesday, fueling worries of deflation in Asia’s fourth-largest economy.
The country’s consumer price index inched up 0.5 percent last month from a year earlier, the report by Statistics Korea showed.
Last month’s number represents a gain from 0.4 percent growth tallied for both April and March, which were the lowest increases since July 1999, when consumer prices moved up just 0.3 percent on-year.
Excluding the effect of the cigarette price hike, South Korea’s consumer prices effectively dropped last month from a year earlier.
Cigarette prices rose by an average of 2,000 won ($1.79) per pack starting this year.
“The low consumer inflation rate is mainly due to a drop in international crude prices that impacted refined petroleum products,” said Kim Bo-kyoung, head of the statistical agency’s prices statistics division. “The lowering of city gas prices further contributed to weak consumer price gains.”
Oil prices plunged 19.3 percent on-year in May, while electricity, water and gas charges fell 9 percent. On the other hand, agrofisheries prices that were in negative territory in April advanced 2.7 percent last month.
The country’s core inflation, which excludes volatile oil and food prices, increased 2.1 percent on-year and was also up 0.3 percent from the previous month. May marked the fifth straight month that core inflation grew more than 2 percent on-year.
The statistical office claimed that the core inflation rate exceeding the 2 percent mark is a sign that people are spending.
The cost of services gained 1.6 percent in May from the year before and was up 0.1 percent vis-a-vis April due to rising costs of rent, as well as gains in private and public service fees.
The report, however, showed that the “living necessities” price index, which measures the cost of key products that people consume on a daily basis, again contracted 0.4 percent on-year.
This marks the fifth time that the index has fallen into negative territory since the statistical agency started compiling such figures in 1995. Growth numbers have been falling generally since August 2014. Living necessity prices have been on the minus side from January onward.
The finance ministry said supply-side developments such as low crude oil prices depressed consumer price gains last month.
Despite weak prices that have stirred deflation concerns, core inflation remained in the 2 percent range, while the country’s expected inflation rate released by the Bank of Korea stood at 2.5 percent, unchanged from April, the ministry said. This rate is a barometer of future inflation as predicted by economic factors.
“Crude oil prices have been rising and with economic growth gaining some momentum, consumer prices should rise in the coming months,” the ministry said.
The ministry said that while it does not expect any sharp changes in inflation numbers, it will keep close tabs on education, medical and communication-related market prices that have a direct impact on people’s everyday lives. (Yonhap)
