South Korea’s inflation rate in December slowed to 1.3 percent on year, the weakest in five months, to end 2018 at an annualized rate of 1.5 percent and missing the 2.0 percent annual target for the third straight year.
According to Statistics Korea on Monday, the country’s consumer price index (CPI) rose 1.3 percent in December from a year earlier, decelerating sharply after three straight months of inflation averaging 2.0 percent despite still-strong food prices.
For full 2018, the annualized inflation rate climbed 1.5 percent, below the government estimate of 1.6 percent and the central bank’s target of “around 2.0 percent.”
This is the third year inflation has hovered in the 1 percent range. Annual inflation fell to an all-time low of 0.7 percent in 2015 before picking up pace to 1.0 percent the following year and 1.9 percent in 2017. The last time inflation jumped more than 2 percent was in 2012 when it increased 2.2 percent.
Prices remained subdued throughout 2018 on weak domestic demand amid growing concerns over the country`s economic growth and dismal job market. For 11 straight months, the country’s inflation stayed well below the 2.0 percent target until September when it jumped 2.1 percent. It had sustained the 2.0 percent level through November, flagging stagflation concerns.
The tepid inflation readings would likely give the Bank of Korea more reason to stay conservative in rate increases next year. The central bank raised its benchmark interest rate only once this year to 1.75 percent in November.
For the full year, prices of agricultural, livestock and fishery products added 3.7 percent, lifting the headline CPI by 0.27 percentage point.
Industrial goods including petroleum products climbed 1.3 percent to push up the headline inflation by 0.42 percentage point. Prices of gasoline jumped 6.0 percent, diesel 8.3 percent and auto LPG 5.7 percent. But petroleum prices in December fell 2.8 percent on year, the first decline in more than two years due to the fuel tax cuts that took effect in November.
Utilities fees fell 2.9 percent this year while service charges including rent prices and personal and public service charges gained 1.6 percent.
The index for everyday expenses reflecting spending for stable food and utility fees rose 1.3 percent on year. The fresh food index including vegetable, fruits and fish surged 6.6 percent as vegetable prices jumped 5.5 percent.
Core inflation, which excludes volatile oil and agricultural goods, gained 1.2 percent from a year earlier. The CPI that strips out food and energy categories, the standard by the Organization for Economic Cooperation and Development (OECD), was also up 1.2 percent.
By Kim Tae-joon and Kim Hyo-jin
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