South Korea's inflation growth hits over 13-year high in April
South Korea's consumer prices rose at the fastest pace in more than 13 years in April amid soaring energy costs caused by Russia's conflict with Ukraine and a rebound in demand from the pandemic, data showed yesterday.
Consumer prices spiked 4.8 per cent last month from a year earlier, accelerating from a 4.1 per cent onyear gain in March, according to the data from Statistics Korea.
It marked the fastest on-year rise since the same 4.8 per cent increase in October 2008, when the country was in the midst of the 2008-09 global financial crisis. Inflation growth also exceeded 4 per cent for the second straight month.
Consumer prices rose above 2 per cent - the central bank's inflation target over the medium term for the 13th straight month in April.
South Korea's inflation has been under upward pressure as oil prices surged following Russia's military operation in Ukraine and global supply chain disruptions continued. Demand-pull price pressure has also risen amid the economic recovery.
Most of last month's price gains were driven by a hike in prices of petroleum products and personal service costs, according to the statistics agency.
"There is a high possibility that inflation will continue its significant growth momentum. For the time being, consumer prices are not likely to markedly slow," Eo Woon-sun, a senior Statistics Korea official, told reporters.
Dubai crude, South Korea's benchmark, averaged US$102.82 per barrel in April, up 63.4 per cent from a year earlier. It hit a yearly high of $127.86 per barrel on March 9. South Korea depends mainly on imports for its energy needs.
There is a high possibility that inflation will continue its significant growth momentum. For the time being, consumer prices are not likely to markedly slow."
Eo Woon-sun, a senior Statistics Korea official
Prices of petroleum products jumped 34.4 per cent on-year in April, an acceleration from a 31.4 per cent gain in March due to surging oil prices.
Electricity, gas and water supply prices rose 6.8 per cent, led by the Korea Electric Power Corp.'s decision to hike the electricity rate.
Personal service prices and the price of dining out continued to rise last month amid the economic recovery.
Personal service prices increased 4.5 per cent amid relaxed virus curbs. The price of dining out gained 6.6 per cent, the fastest growth since April 1998.
Prices of agricultural, livestock and fisheries products rose 1.9 per cent on-year, picking up from a 0.4 per cent gain in March.
Core inflation, which excludes volatile food and oil prices, advanced 3.1 per cent on-year in April.
Prices of daily necessities - 141 items closely related to people's daily lives, such as food, clothing and housing - climbed 5.7 per cent on-year in April, the steepest onyear gain since August 2008.
Elevated inflation lent support to the prospect that the Bank of Korea (BOK) will likely further hike the policy rate to rein in price pressure and curb household debt.
In April, the BOK raised the benchmark interest rate by a quarter per centage point to 1.5 per cent, the fourth rate hike since August last year.
The BOK held a meeting on inflation yesterday and voiced concerns that consumer prices growth could stay in the 4 per cent range "for the time being," citing the impact from high commodity prices, lifting of social distancing rules, the crisis in Ukraine and COVID-19 lockdowns in China.
The central bank also emphasised the need to keep close tabs on inflation expectation that could be under upward pressure amid worries that prices could spike especially among frequently-consumed goods and services.
South Korean consumers' inflation expectation rate hit a nineyear high in April, central bank data showed. Consumers in April expected inflation to grow 3.1 per cent over the next 12 months, up from the 2.9 per cent forecast made in the previous month.
Last month, the International Monetary Fund lowered its 2022 growth outlook for the South Korean economy to 2.5 per cent while raising its inflation projection to 4 per cent.
Finance Minister Hong Nam-ki said it is urgent to stabilise prices of items closely related to people's lives, as inflation pressure will likely remain high for the time being.
Since Sunday, the government has cut fuel taxes by a record 30 per cent from the previous 20 per cent in a bid to ease people's burden from high energy costs. The measure will be effective for three months until end-july.