Has the price peak passed? Uptrend slows for second month Core prices are volatile, and oil prices and exchange rates are in ambush

Food prices rose 9.0% last month, the highest in 30 years. A price tag reflecting the price increase is set up in a restaurant in Seoul on the 5th. /happy news

Consumer prices rose 5.6% last month from a year earlier. The inflation rate, which was 6.3% in July, slowed for two consecutive months following August (5.7%). However, the rate of increase in the core price (price excluding agricultural products and petroleum), which shows the underlying trend of prices, was 4.5% last month, up 0.1 percentage point from August. As a result, there are comments that ‘inflation has already peaked’, but on the other hand, there is also an objection that it is too early to make a decision.

Has the price peak passed?  Growth slows for second month, core inflation is volatile, and oil prices and exchange rates are in 'ambush'

According to the National Statistical Office on the 5th, consumer price inflation rose by 5.6% in the month of last year. Compared to the previous month, it rose by 0.3%. The consumer price inflation rate jumped from 3% in January and February to 4% in March and April, then rose to 5.4% in May, and recorded 6.0% and 6.3% in June and July, respectively that. The inflation rate in July was the highest since November 1998 (6.8%) during the financial crisis. Then, in August and September, it fell to the 5% level again.

Eo Woon-seon, director of economic trend statistics at the National Statistical Office, said, “There is a possibility that (inflation) has passed the peak.” But there are also many worrying factors. First of all, the fall in international oil prices is mainly responsible for the slowdown in inflation last month, as OPEC+, a consultative body between the Organization of the Petroleum Exporting Countries (OPEC) and Russia, is considering cutting production by more than 1 million. barrels of crude oil per day, oil prices may rise again.

The rise in core inflation is also a cause for concern. Core prices are prices excluding food and energy, which are highly volatile due to seasonal factors or temporary shocks. It shows the basic trend of prices. The core inflation rate last month was 4.5%, but since June this year, it has been at the 4.4-4.5% level.

The core inflation rate remained in the 1~2% range until last year, and remained in the 3% range until April this year. Lee Hwan-seok, Deputy Governor of the Bank of Korea, said on the 5th, “The rate of consumer price inflation in September decreased slightly, but the core price continues to rise mainly for personal service items such as restaurants. “We will continue to rise,” he said.

The won-dollar exchange rate, which is maintained at 1,400 won, is also a variable. This is because the high exchange rate raises the price of imports. The increase in electricity and city gas rates is also a factor that puts pressure on prices. From this month, the government has decided to raise the electricity rate for houses by 7.4 won per kWh and the industrial electricity rate up to 16.6 won per kWh, and also raise the gas rate by 2.7 won per megajoule (MJ). As a result, the government predicted that consumer prices would rise by 0.3 percentage points.

The rise in consumer prices last month was driven by industrial goods and personal services. Their contribution to inflation (compared to the same month in the previous year) was 2.32 percentage points and 1.95 percentage points, respectively. Among them, the price of a personal service rose 6.4% from the same month the previous year, the highest since April 1998 (6.6%). Among personal services, the inflation rate for eating out was 9.0%. This is the highest in 30 years since July 1992 (9.0%). The prices of chicken (10.7%) and sashimi (9.6%) jumped significantly.

Reporter Do Byung-wook [email protected]

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