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Inflation pressure mounts as prices leap 2.6% in Aug

Apartment complexes are seen from Namsan, Seoul. (Yonhap)
Apartment complexes are seen from Namsan, Seoul. (Yonhap)

Consumer inflation rose 2.6 percent last month, staying above 2 percent for the fifth month in a row, on the back of higher agricultural product and international crude oil prices, Statistics Korea reported Thursday.

It is the first time since 2017 that consumer inflation has remained above 2 percent for five consecutive months.

Core inflation, which excludes volatile food and oil prices, rose 1.3 percent last month from a year earlier.

Given that the government plans to dole out 11 trillion won ($9.49 billion) in cash handouts to more than 20 million households starting this month, it appears that the Bank of Korea’s goal of limiting the annual rate of inflation to 2 percent will be hard to achieve.

“While the upward pressure on the demand side has increased as the economy is recovering, factors such as agricultural, livestock and fishery products and international oil prices have risen more than expected,” Eo Woon-sun, a senior Statistics Korea official, told reporters.

The breakdown of data showed the cost of agricultural, livestock and fisheries products surged 7.8 percent on-year due to a prolonged monsoon season.

The cost of industrial products rose 3.2 percent, showing the highest growth since May 2012. Prices of gasoline, diesel and liquefied petroleum gas for vehicles surged 20.8 percent, 23.5 percent and 25.3 percent, respectively.

Home prices increased 1.6 percent last month, marking the 16th straight month of upward movement despite government measures to cool down the market.

First Vice Finance Minister Lee Eog-won pointed out that downside factors, such as a better balance between supply and demand for agricultural products, coexisted with upside factors such as increased demand during the Sept. 18-22 Chuseok holiday as well as the autumn rainy season and typhoons, to create uncertainty for September’s inflation forecast.

“If necessary, we will respond immediately, such as by devising a plan to supply additional agricultural and livestock and fishery products,” Lee said.

By Park Han-na (