South Korea’s consumer prices in May fell 0.3 percent on year, revisiting sub-zero territory for the first time in eight months amid subdued demand and weak oil prices under the pandemic.

The consumer price index (CPI) for May was 104.71, down 0.3 percent from the same month a year earlier, Statistics Korea data showed Tuesday.

South Korea experienced its first negative inflation in September 2019, when the index fell 0.4 percent. Price growth had stayed below 1 percent throughout 2019. Prices strengthened from late 2019 until the coronavirus pandemic slowed the pace to 0.1 percent in April.

Agricultural, livestock and fishery product prices rose 3.1 percent in May as COVID-19 prompted more people to eat at home.

Prices of industrial products dipped 2.0 percent. In particular, petroleum prices plunged 18.7 percent amid an epic fall in global oil prices, dragging down the headline inflation by 0.82 percentage point.

Service costs inched up at their slowest pace since December 1999 at 0.1 percent.

Public service costs fell 1.9 percent, knocking off 0.27 percentage point from the headline inflation, largely due to increased state support for education fees. Service costs in the private sector climbed 0.9 percent, with eating-out costs adding a mere 0.6 percent. Other service costs such as travel gained just 1.2 percent, as most outside leisure activities were halted due to coronavirus restrictions.

The stimulus impact of the emergency cash handouts in April will likely become eflected in June as actual spending started from mid-May, the agency said.

Ahn Hyung-joon of Statistics Korea played down the threat of deflation, seeing the recent price drop as temporary.

“The price decline in May was largely due to supply-side factors rather than depressed demand. It’s only been a month, making it too early to call it a deflation,” he said.

The Bank of Korea last week cut the policy rate by 25 basis points to a record low of 0.50 percent in efforts to shore up the virus-hit economy. The central bank also slashed Korea’s 2020 growth outlook, estimating a 0.2-percent contraction compared with a 2.1-percent growth forecast in February. The finance ministry on Monday also revised down its growth outlook to 0.1 percent.

By Kim Hyo-jin

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